What is the Medicare Shared Savings Program?

The Medicare Shared Savings Program, created
as part of the Affordable Care Act, is bringing population health management to Medicare
patients through a new delivery model called an ACO. But what is an ACO? An accountable care
organization is a group of health care providers — so hospitals, physicians, maybe even post-acute
providers — who are collectively responsible for the cost and quality of care a particular
set of patients receive over time. Physicians choose to be a part of an ACO, and
those physicians have their own patients. And that link, ACO to physician to patient,
is how Medicare assigns patients to the ACO. If — over the course of the year — a patient
gets most of their primary care from physicians in a particular ACO,
then that ACO is going to be responsible for the cost and quality of the care they receive. And that means all the care — even
from providers outside of the ACO. Once an ACO has its patients, how does it get paid? Under shared savings, providers in an ACO
treat a patient, then bill and get paid by Medicare. Nothing new there. The big difference
is that on top of that normal payment, the ACO can earn a bonus payment based
on the cost and quality of the care patients receive. But there’s a catch. First they
have to qualify for the bonus. When the ACO signs up for the shared savings
program, Medicare looks at the historical cost for patients treated by the ACO, and
then sets a savings target based on that cost. So if treating a patient at the ACO cost
$10,000 before, Medicare could tell the ACO they have to treat the same patient for less
than $9,800 this year to get their bonus. Each year Medicare will look at all their data
and adjust that target based on national trends. The idea is to get the ACO to focus
on controlling cost growth over time. At the end of the year, Medicare looks at how
much it spent on patients assigned to the ACO and compares the actual spending against
the target. If the ACO was above the target? No bonus. In fact, if the ACO
missed the target by too much, Medicare could actually demand they give back
some of the money they’d already paid out. But if the ACO meets or exceeds the target,
then they qualify for a bonus. In essence, Medicare will share
the savings back with the ACO. If the ACO qualifies for the bonus,
how much will they actually get? To figure that out, Medicare looks at
the quality of the care the ACO delivered. So if an ACO sacrifices quality to cut costs,
Medicare isn’t going to reward them for that. The combination of savings and quality
ultimately determines if this bonus is big or small. The bonus payment comes with few strings attached —
the ACO can pretty much spend it however they want. That’s shared savings in a nutshell. Dollars are tied to patients, patients are tied to
physicians, and physicians are tied to ACOs. But as you might expect, the devil’s in the details. And
the Medicare Shared Savings Program is complex. Visit advisory.com to see
the Advisory Board’s collection of best practices, research, tools, and expert insight.

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