Reimbursing healthcare services based on outcomes rather than volume through an Accountable Care Organization (ACO) payment model produced overall savings while reducing rehospitalization rates, found a recent study conducted by the Dartmouth Institute for Health Policy and Clinical Practice.
The study looked at cost savings generation by the Physician Group Practice Demonstration, a Medicare program run from 2005 to 2010 that closely resembled today’s ACO model with pay-for-performance and shared savings characteristics.
The PGPD had a value-based payment model which produced annual savings of $114 per Medicare beneficiary, according to study analysis. For dual eligibles, who qualify for both Medicare and Medicaid, the demonstration realized savings of $532 per beneficiary.
On the rehospitalization side, rates for 30-day medical readmissions decreased 0.67% overall for both populations (Medicare beneficiaries, and dual eligibles) and 1.07% for dual eligibles.
Surgical readmissions for dual eligibles decreased 2.21% overall.
The findings are “statistically significant,” according to the researchers, because they’re based on an experimental group of nearly a million Medicare, Medicaid, and dual eligibles and a control group consisting of more than 7.5 million beneficiaries.
“The study shows promise for the new healthcare delivery system reforms,” said Carrie H. Colla, lead author of the study and assistant professor at The Dartmouth Institute for Health Policy and Clinical Practice. “And these reforms should align incentives for payers, providers and patients.”
While the physician groups participating in the PGPD demonstration could receive as much as 80% of the savings they produced, the ACO model savings are slightly less at between 50% to 70%.
Based on the study, Colla says ACOs have the potential “to improve health care and reduce spending” for dual eligibles.
“The current fee-for-service payment system has contributed to the fragmented, poorly coordinated care that many patients, especially those who are sick, experience every day,” said Elliott S. Fisher, M.D., one of the authors of the report, in a statement. “New payment models like ACOs are intended to encourage providers to coordinate care by offering them a share of any savings achieved when they improve care. These results indicate that when organizations really try to adapt to these new models, they can benefit their patients’ lives and their bottom lines.”
Written by Alyssa Gerace