Avoiding unintended incentives in ACO payment models.

Area of Science:

• Health policy
• Healthcare economics
• Medicare Shared Savings Program

Background:

• The Medicare Shared Savings Program (MSSP) aims to reduce healthcare spending by accountable care organizations (ACOs).
• Current MSSP benchmark calculations may inadvertently create perverse incentives for ACOs.

Purpose of the Study:

• To analyze how current ACO benchmark rules affect incentives for Medicare spending reduction.
• To propose improvements for ACO payment models and benchmark calculations.

Main Methods:

• Analysis of the weighting system in ACO benchmark calculations.
• Examination of spending patterns in the years preceding ACO contract periods.

Main Results:

• Unequal weighting of past spending, with high weight on the pre-contract year, incentivizes increased spending.
• Current rules may diminish ACOs' motivation to achieve actual Medicare savings.
• Potential for ACOs to inflate benchmarks to facilitate future shared savings.

Conclusions:

• Revising benchmark calculation weights is crucial for aligning ACO incentives with savings goals.
• Implementing alternative payment models, considering external benchmarks, could enhance MSSP effectiveness.
• Policy adjustments are needed to ensure ACOs are motivated to reduce, not increase, Medicare spending.