Medicare Accountable Care Organizations: Past Performance and Future Directions

This Congressional Budget Office report summarizes recent research findings about Medicare accountable care organizations (ACOs) and the factors that have contributed to or limited their ability to achieve net budgetary savings for the Medicare program. ACOs are groups of providers, such as physicians and hospitals, that assume responsibility for the quality and cost of care for an assigned group of patients. Providers participate in Medicare ACO programs voluntarily. CBO found the following:

• Certain types of ACOs are associated with greater savings. They include ACOs led by independent physician groups, ACOs with a larger proportion of primary care providers (PCPs), and ACOs whose initial baseline spending was higher than the regional average. (An ACO’s baseline spending is generally the average spending per person in the Medicare fee-for-service, or FFS, program among beneficiaries that would have been assigned to the ACO over several calendar years before the start of the ACO’s contract period.)
• Some factors limit the savings from Medicare ACOs. Those factors include weak incentives for ACOs to reduce spending, a lack of the resources necessary for providers to participate in ACO models, and providers’ ability to selectively enter and exit the program on the basis of the financial benefits or losses they anticipate from participating.

Researchers and outside experts have suggested various policy approaches that could increase the savings that ACOs generate for the Medicare program. Those approaches include increasing providers’ incentives to participate in ACO models, increasing their incentives to reduce spending, and increasing beneficiaries’ awareness of and engagement with ACO models. CBO has not assessed the effects of those policy approaches or determined their net budgetary impact.