Project 3: Effects of ACOs in Medicare on Utilization and Quality: Heterogeneity

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PROJECT SUMMARY/ABSTRACT In principle, delegating risk should encourage large integrated provider groups to achieve efficiencies. As suggested by our prior work, risk-bearing plans in Medicare Advantage (MA) may produce greater value than Traditional Medicare (TM) in terms of quality of care and resource use, but because MA plans are typically not clinically integrated with providers, the influence they can exert on contracting providers may be more limited relative to Accountable Care Organizations (ACOs). In Project 3, we will conduct rigorous evaluations of ACO initiatives in TM to determine if direct risk contracting with integrated provider groups is a viable complementary strategy for Medicare to control spending while improving quality of care. The gains achieved by an ACO will be determined by the changes in payment incentives introduced through its contracts with Medicare and other payers and its capacity to limit utilization and improve quality of care in response to those incentives. As suggested by previous research, the ability of ACOs to deliver more cost-effective care may be related to structural characteristics such as size, specialty mix, and integration with hospitals. In particular, advanced models of primary care such as the patient-centered medical home have been proposed as essential building blocks of high-performing ACOs. As potential predictors of performance under new payment incentives, these factors may also influence organizations' decisions to participate in the Medicare ACO programs. Project 3 will identify conditions systematically related to effective responses by organizations to ACO payment models. We focus on organizations participating in the Medicare ACO programs because of their large number (we anticipate over 400 ACOs in our analysis), their diversity, and the concentration of concurrent commercial ACO contracts among them. We will link novel national databases on provider organizations, their structural capabilities, and their commercial ACO risk contracting to claims data to identify and describe ACOs and non-ACO provider groups. By elucidating predictors of program participation and responses by organizations, our project will provide an empirical basis for fostering organizational learning from high performers, improving the structure of ACO contracts, and estimating potential gains from program expansion to existing and newly integrated provider groups. By assessing spillover effects of ACO contracts in Massachusetts on ACOs' patients not included in those contracts, our project will also characterize the extent of organizational change elicited by mixed payment incentives and the potential benefits of aligning incentives across payers.