News & Insight

Is Clinical Integration a Better Prescription than Shared Savings?

By John Marren and Tom Babbo. Edited by Mary Grace Babbo


Despite the best efforts of accountable care organizations (ACOs) within the Medicare program and the use of shared savings models among private payers to realign the otherwise perverse incentives of the fee-for-service health care payment system, costs to consumers continue to climb. In fact, according to several studies cited in a 2016 Wall Street Journal article, most ACOs in the Medicare Shared Savings Program achieved only minimal savings after two years.

Other studies show similar results. Dr. Erwin Blackstone and Dr. Joseph Fuhr criticize ACOs for their expensive and slow implementation of quality control, stating “A better public policy may be to implement a system that encompasses the best practices of successful private integrated systems rather than promoting ACOs.” While Medicare ACOs attempt to achieve the “triple aim” of “…improving the experience of care, improving the health of populations, and reducing per capita costs of health care,” it is unclear whether they are able to do so effectively.

An examination of the 2015 statistics released by the Centers for Medicaid and Medicare Services (CMS) by Health Affairs also shows inconsistency in the implementation of ACOs. The study reports “great variability among individual ACOs in their spending and quality performance,” with “a lack of any strong relationship between spending and quality.” Similarly, the findings for 2015 showed a general trend that more experienced ACOs have the best chance to generate shared savings, confirming patterns detected in CMS data from 2014.

Additionally, consolidated ACOs did not necessarily generate the most efficiency: often, smaller, physician-led ACOs achieved better performance. The study warns against thinking that the consolidation of ACOs necessarily leads to improved quality and lower cost, as well as the ability to achieve shared savings. Mergers and consolidations of ACOs require proper integration, and the study also points to evidence of some privately integrated systems that work more effectively to simultaneously reduce costs and provide quality health care.

So, does this mean that Medicare ACOs and the shared savings model is fundamentally ineffective in solving problems inherent in fee-for-service (FFS) health care reimbursement?  After all, if inefficiencies are and savings are eventually wrung out of the health care system, doctors, hospitals, and other health care providers could ultimately find themselves forced to cut into their own margins. As such, it would seem that the shared savings model provides, at best, a transitional solution for health care providers who want to learn how to adapt to a health care economy that more and more seeks proof of quality and value.

The solution is to develop clinical integration (CI) and ACO enterprises that work with both government and commercial payers. In order to be successful, this solution most involve a standardized system of data that makes health care quality and cost more transparent to both providers and consumers and care management programs to assure that the elderly and chronically ill follow prescribed courses of treatment. Most importantly, CI programs allow for the correct payment of incentives to physicians based on performance, which rewards better quality and more cost-effective care. The development of CI and ACO enterprises will enable a vastly larger number of people to have access to cheaper and better health care, while rewarding physicians and health care practices for implementing these networks.

  Jun 5, 2018  |  By    |   On Health Care