Medicare’s delivery system reform initiatives achieve significant savings and quality improvements – off to a strong start

The Affordable Care Act is providing millions of Americans with access to quality, affordable health coverage—many for the very first time. But fixing America’s health care system means making health care affordable and high quality, as well as accessible.

Results we’ve released today show the progress we’ve made on slowing the rise in health care spending—bending the cost curve—while improving health care quality.

One of the key reforms in the Affordable Care Act is creating Accountable Care Organizations (ACOs). ACOs, are groups of doctors, hospitals, and other health care providers that have agreed to work together to give their Medicare patients better coordinated, high quality care. To the extent that they succeed in providing more effective and efficient care, they can share in the savings to the Medicare program. Interim financial results for 114 ACOs that began work in 2012 show that they generated $128 million in savings for the Medicare trust fund in the first year —while maintaining high quality patient care.

Additionally, initial results from an independent evaluation of 23 Pioneer ACOs, which are those that have more experience with coordinated care, show that they saved the Medicare program $147 million in their first year of operation.

ACOs are helping to improve the quality of health care and, in doing so, lowering costs for taxpayers and patients. While still early in the program, with some ACOs making greater progress than others, the $275 million in savings—and the high quality of care that has accompanied it—are admirable results. ACOs are designed to achieve savings over several years, not always on an annual basis, but this is a very strong start. Moreover, through regular webinars; tools for sharing information and best practices; opportunities for ACOs to connect with one another; and other activities, we’re providing ACOs the infrastructure and resources to learn from one another and to then diffuse what’s working and what’s not.

Delivery system reform takes time, but ACO’s are committed to the program. Dr. Kenneth W. Wilkins, President of Coastal Carolina Health Care said that “Our experience has shown that ACOs can increase quality while lowering costs. As a result of the programs we’ve initiated, our patients have experienced better access to their primary care physician, higher quality measures, and fewer trips to the hospital. We look forward to making continued progress and seeing future results.”

Additionally, as part of the largest and most ambitious test ever of a bundled payment model in Medicare, or any other payer in the U.S., 232 provider groups, hospitals and others have agreed to participate in the Medicare Bundled Payments for Care Improvement initiative. Bundling payment for services that patients receive across a single episode of care, such as heart bypass surgery or a hip replacement—instead of making payments to providers for every single service—rewards the quality of care instead of the quantity of services, and encourages better care coordination.

Congress is also working on a bipartisan and bicameral basis to pass long-term legislation to reform Medicare’s current physician payment system and replace the Sustainable Growth Rate formula with a system that will reward value over volume—and enable more physicians to participate in new models of care that will reward improvements in patient care and total cost reduction. The results we’ve announced today provide strong evidence that these legislative proposals are the right direction for the Medicare program and our nation’s healthcare delivery system.