Savings or Selection? Initial Spending Reductions in the Medicare Shared Savings Program and Considerations for Reform

Context: The Medicare Shared Savings Program (MSSP) establishes incentives for participating accountable care organizations (ACOs) to lower spending for their attributed fee‐for‐service Medicare patients. Turnover in ACO physicians and patient panels has raised concerns that ACOs may be earning shared‐savings bonuses by selecting lower‐risk patients or providers with lower‐risk panels.

Methods: We conducted three sets of analyses of Medicare claims data. First, we estimated overall MSSP savings through 2015 using a difference‐in‐differences approach and methods that eliminated selection bias from ACO program exit or changes in the practices or physicians included in ACO contracts. We then checked for residual risk selection at the patient level. Second, we reestimated savings with methods that address undetected risk selection but could introduce bias from other sources. These included patient fixed effects, baseline or prospective assignment, and area‐level MSSP exposure to hold patient populations constant. Third, we tested for changes in provider composition or provider billing that may have contributed to bonuses, even if they were eliminated as sources of bias in the evaluation analyses.

Findings: MSSP participation was associated with modest and increasing annual gross savings in the 2012‐2013 entry cohorts of ACOs that reached $139 to $302 per patient by 2015. Savings in the 2014 entry cohort were small and not statistically significant. Robustness checks revealed no evidence of residual risk selection. Alternative methods to address risk selection produced results that were substantively consistent with our primary analysis but varied somewhat and were more sensitive to adjustment for patient characteristics, suggesting the introduction of bias from within‐patient changes in time‐varying characteristics. We found no evidence of ACO manipulation of provider composition or billing to inflate savings. Finally, larger savings for physician group ACOs were robust to consideration of differential changes in organizational structure among non‐ACO providers (eg, from consolidation).

Conclusions: Participation in the original MSSP program was associated with modest savings and not with favorable risk selection. These findings suggest an opportunity to build on early progress. Understanding the effect of new opportunities and incentives for risk selection in the revamped MSSP will be important for guiding future program reforms.

Keywords: Medicare, accountable care organizations, selection bias, quasi-experimental studies.

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