Accountable care organizations may create financial losses for the first three years, according to a report published in New England Journal of Medicine.
The authors of "The ACO Model — A Three-Year Financial Loss?" studied data from the Centers for Medicare and Medicaid Services' Physician Group Practice Demonstration from 2005-2010 on the premise that its design is similar to that of the Medicare Shared Savings Program. They also examined data from the Government Accountability Office and Health and Human Services department to evaluate possible financial implications of an ACO.
The data showed that participants in the demonstration did not break even on their initial investment. In a five-year span with the average investment per PGP provider, a margin of 13 percent was required to break even, according to the authors' calculations. An ACO yielding the mean initial investment of $1.7 million would require a margin of 20 percent for the three years CMS anticipates as a minimum performance period, according to the report.
In addition, the authors reported that only half of the PGPs in the demonstration received shared savings by the third year. They estimate that physician group practices participating in ACOs would not receive a reasonable return on investment for more than five years.
Read the New England Journal of Medicine report on accountable care organizations.
Read more coverage on accountable care organizations:
- New Jersey Bill Would Create Medicaid ACOs
- The Journey to a Successful ACO
- Hospitalists and ACOs: The Perfect Fit?
The authors of "The ACO Model — A Three-Year Financial Loss?" studied data from the Centers for Medicare and Medicaid Services' Physician Group Practice Demonstration from 2005-2010 on the premise that its design is similar to that of the Medicare Shared Savings Program. They also examined data from the Government Accountability Office and Health and Human Services department to evaluate possible financial implications of an ACO.
The data showed that participants in the demonstration did not break even on their initial investment. In a five-year span with the average investment per PGP provider, a margin of 13 percent was required to break even, according to the authors' calculations. An ACO yielding the mean initial investment of $1.7 million would require a margin of 20 percent for the three years CMS anticipates as a minimum performance period, according to the report.
In addition, the authors reported that only half of the PGPs in the demonstration received shared savings by the third year. They estimate that physician group practices participating in ACOs would not receive a reasonable return on investment for more than five years.
Read the New England Journal of Medicine report on accountable care organizations.
Read more coverage on accountable care organizations:
- New Jersey Bill Would Create Medicaid ACOs
- The Journey to a Successful ACO
- Hospitalists and ACOs: The Perfect Fit?