Not If But How: Distributing Savings in ACOs

Following the first positive reports of shared savings in at least some accountable care organizations (ACOs), the recent question regarding the future of the ACO model has begun to shift from whether savings will be realized at all to how to distribute such savings. While in regard to some networks the debate remains to revolve around whether ACOs will be effective and successful in the long-run, new findings regarding actual ACOs that have generated savings are now focusing on the best methods for splitting the savings realized by these organizations. A new commentary attempts to tackle that question and discuss the correct distribution approach of savings in ACOs. Although the answer seems to lie in a balance of several factors and an in-depth deliberation of ethical considerations, will this quandary further complicate an already complex new model? Further, will the gray areas in proper distribution become another reason physicians choose not to join ACOs in the future?

JAMA Viewpoint

The Journal of the American Medical Association published a Viewpoint entitled “Shared Savings in Accountable Care Organizations” which discussed the considerations that ACOs, which have received shared savings, should take into account when attempting to distribute those savings among the various parties that contributed to those results. The Viewpoint noted that several different individuals and entities may be responsible for generating shared savings in ACOs including physicians, physician’s assistants, nurse practitioners, group practices, and even hospitals. In turn, the commentary suggested that five “dimensions of distributional fairness” should be considered to ensure that the savings are split in a fair and equitable manner: performance, equality, systematic disadvantages, luck, and team contributions. Moreover, the Viewpoint referenced the ACO implementation Toolkit, which suggested that savings are best split up based on certain “pools” of distribution. The three projected models in the Toolkit were: (1) a pool of shared savings to offset revenue reduction for ACOs partners that experience negative changes due to the formation of the ACO; (2) a pool of shared savings for cost savings to be reserved for partners that actually generate returns by improving patient management; and (3) a pool for the return of capital to those partners who were principal investors. Regardless of the method and considerations utilized for distribution of shared savings, the authors of the Viewpoint stress that distributional fairness should be at the core of the chosen method and note that cost-sharing schemes are required to be listed on each ACO’s individual website.

Discussion

At the end of January 2014, HHS announced that 54 percent of the 114 ACOs participating in the Medicare Shared Savings Program reduced expenditures to amounts lower than the projected levels and, in turn, 29 ACOs realized shared savings of over $126 million total. The JAMA Viewpoint even highlighted an ACO that generated $5.2 million in shared savings independently. Yet, a new study found that despite initial successes and growing popularity, approximately 60 percent of physicians are still avoiding ACOs. Further, the study revealed, of those physicians who were found to have joined ACOs, most were already associated with large practices or physician-hospital organizations. According to reports in ModernHealthcare.com, this data suggested that “too many medical groups lack the necessary capacity to manage the financial risk of accountable care.”

In light of that consideration, does the prospect of having to fairly distribute costs even in successful ACOs that have met projected cost-saving goals function as just another disincentive for physicians to join ACOs? If so, this could be a problem for the future success of the ACO model. In other words, if a majority of physicians are not joining ACOs due to a lack of capacity to deal with the financial implications, will uncertainty with regard to the proper way to deal with return to financial risk compound these issues?