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$381.5m in Net Savings Delivered by Medicare Program That Promotes Rural Health Care

Rockville, Md.  –  A new study by Abt Global and partners published in Health Affairs found that a program to support rural health care providers resulted in $381.5 million in net savings for Medicare. The savings accrued over three years, primarily driven by decreases in hospitalizations and other institutional care services. This study expands on the findings from the evaluation of the Accountable Care Organization (ACO) Investment Model (AIM) to improve health care delivery in rural and underserved areas while maintaining quality care for patients. ACOs are groups of physicians, hospitals, and other health care providers that participate in Medicare’s Shared Savings Program. Under AIM, ACOs received up-front payments that were recouped from later savings shared by the ACOs and Medicare.  

Downside Risk Needs to Be Addressed

While Medicare, the participating care providers, and patients benefited from AIM, nearly two-thirds of the 41 AIM ACOs exited the program at the end of their three-year term. Continuing in the Shared Savings Program would have required the ACOs to take on downside risk (i.e., the potential for financial losses in addition to receiving the up-front payments), and many ACOs cited this requirement as a reason for exiting. Abt’s study found no differences in the estimated savings provided by the exiting ACOs versus the remaining ACOs. These findings, coupled with the large net savings to Medicare attributable to the model even before ACOs would take on the downside risk, suggest that the insistence on including downside risk for ACOs may substantially reduce opportunities for Medicare to save money.

Overall, then, AIM had mixed success. On the one hand, reductions in total Medicare spending were substantial and greater than in an earlier, similar model. On the other hand, the up-front investments in AIM ACOs were not sufficient to maintain participation in the face of downside risk, even if they succeeded in encouraging ACO participation in more rural and underserved markets.

Implications for CMS’s CHART

CMS’s recently announced Community Health Access and Rural Transformation (CHART) Model in which there are two tracks–a hospital-focused model and an ACO transformation model similar to AIM–are meant to help stabilize hospital revenue in rural areas. Our findings from the AIM evaluation have several implications for CHART. First, policy makers may find it advantageous to allow rural providers in the ACO transformation track to pursue a slower path to taking on downside risk. This could promote sustained participation, which may potentially yield greater long-term savings to Medicare.

Second, although preventing unnecessary hospital or skilled nursing facility stays is good for beneficiaries, these efforts are associated with reductions in Medicare revenue for rural inpatient facilities. This reduction in services may exacerbate financial stresses on facilities, potentially contribute to additional closures, and further reduce access to care providers in underserved areas. Our findings suggest that policy makers should carefully consider the amount of Medicare savings to retain for Medicare and the amount to be reinvested in sustaining providers in underserved areas.  

“At a high level, the significant savings tell us ACOs can succeed without downside risk,” says Matt Trombley, Abt’s lead investigator. “The question to be answered in subsequent models like CHART is whether Medicare can find the right balance to continue encouraging and maintaining ACO participation because, in those first three years, everyone is benefiting.”

About Abt Global
Abt Global is a global consulting and research firm that combines data and bold thinking to improve the quality of people's lives. We partner with clients and communities to advance equity and innovation—from creating scalable digital solutions and combatting infectious disease, to mitigating climate change and evaluating programs for measurable social impact.

Eric Tischler
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