Benchmarking Cost-of-Care Improvement for Value-Based Populations: Looking to ACOs for Clues

Fueled in part by a desire to align their financial interests with those of physicians and in part by major shifts in the industry, many health systems are demonstrating a renewed interest in adopting value-based strategies and taking on risk for defined patient populations. In a recent planning project, ECG was asked by a health system to provide recommendations for developing its provider network to best position the organization for success and maximize savings.

To provide guidance, ECG turned to the recent performance of Medicare ACOs to provide clues on how to optimize performance. The goal was to project the possible outcomes for the group and understand how the best groups became successful at managing care.

We found no single ACO attribute that indicated a perfect correlation to savings. But several metrics aligned with financial success—some of which will come as no surprise—and should guide the development and strategies for value-based tactics.

The three metrics that indicated the strongest relationship to savings were as follows:

• Higher risk adjustment factor (RAF) scores
• Larger PCP adjusted panel sizes
• Higher PCP-to-specialist ratios

Analysis of Factors

To inform the development process, ECG analyzed a large set of Medicare ACO participant results over a five-year span. The analysis examined the common characteristics of all ACO participants, excluding extreme outliers, based on savings rates from 2013 to 2017. This comprehensive data set encompassed varying sizes and years of experienced ACO organizations across the country.

Our analysis revealed that ACO performances are trending in the right direction. Groups are becoming more adept at achieving utilization savings as the skills and tools necessary for care management become more prevalent across the industry. In 2017, over a third of all ACOs achieved positive savings rates, compared to less than 25% only five years earlier. The ACO savings rate trend below illustrates these findings.

ACOs: Positive Savings Rate Trend

Over the five-year period, there were 620 different participating ACOs, with the number of participants varying across the five years. ECG assessed the performance of the 620 ACOs based on seven variable metrics to establish a basis for comparison and benchmarking as groups adopt performance targets.

ECG organized the ACOs into quintiles for each of these metrics to determine whether there was a correlation between the variable and the corresponding performance. As illustrated by the charts below, five of the metrics had direct correlations while the remaining two metrics were deemed inconclusive.

RAF Score

High RAF scores are positively correlated with higher savings rates.

Indication: Higher levels of acuity likely allow groups more opportunities to effectively manage their patient population and medical budget.

PCP-Adjusted Panel Size

Larger panel sizes are positively correlated with higher savings.

Indication: Physician care teams may apply more consistent protocols across a larger population, allowing care teams to focus on higher-risk patients.

PCP-to-Specialist Ratio

Higher PCP (physicians and APPs) to specialist (physicians only) ratios positively correlate with higher savings.

Indication: Groups with more PCPs than specialists likely work more closely with the in-group specialist to manage costly procedures and hospitalizations

Number of Specialists

Higher numbers of total specialists negatively correlate with generated savings.

Indication: More specialists may make it problematic to achieve a high PCP-to-specialist ratio—a key indicator of success, as previously discussed.

Specialists to Specialist APPs

Higher specialists to specialist APPs negatively correlate with generated savings.

Indication: Fewer specialist APPs may mean less focus on post-acute care planning and discharges, resulting in costly implications.

Patient Population Size

Although it appears there is somewhat of a negative correlation between large panel sizes and generated savings, the range of generated savings (-0.01% to 0.55%) is narrow; therefore, we deemed the metric inconclusive.

Indication: N/A

Total Providers

The smallest groups in terms of total providers generate the highest savings. However, quintiles two through five have inconsistent trends. Therefore, we deemed the metric inconclusive.

Indication: N/A

ACO Performance Findings

Based on the analysis, it is evident that certain group attributes consistently trend with successful performance:

• Higher RAF scores
• Larger PCP adjusted panel sizes
• Higher PCP-to-specialist ratios
• Fewer specialists
• Fewer specialists to specialist APPs

These insights are critical in evaluating whether your group is ready for shared-risk compensation models and how you can best position your group for success.

ECG is your expert partner for developing and managing your value-based strategy. Learn more about our work with value-based organizations.

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