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. 2012 Dec 28;2(4):mmrr.002.04.a04.
doi: 10.5600/mmrr.002.04.a04. eCollection 2012.

Statistical uncertainty in the Medicare shared savings program

Derek DeLia  1 , Donald Hoover  2 , Joel C Cantor  1
Affiliations

Statistical uncertainty in the Medicare shared savings program

Derek DeLia et al. Medicare Medicaid Res Rev. .

Abstract

Objective: Analyze statistical risks facing CMS and Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program (MSSP).

Methods: We calculate the probability that shared savings formulas lead to inappropriate payment, payment denial, and/or financial penalties, assuming that ACOs generate real savings in Medicare spending ranging from 0-10%. We also calculate expected payments from CMS to ACOs under these scenarios.

Results: The probability of an incorrect outcome is heavily dependent on ACO enrollment size. For example, in the MSSP two-sided model, an ACO with 5,000 enrollees that keeps spending constant faces a 0.24 probability of being inappropriately rewarded for savings and a 0.26 probability of paying an undeserved penalty for increased spending. For an ACO with 50,000 enrollees, both of these probabilities of incorrect outcomes are equal to 0.02. The probability of inappropriate payment denial declines as real ACO savings increase. Still, for ACOs with 5,000 patients, the probability of denial is at least 0.15 even when true savings are 5-7%. Depending on ACO size and the real ACO savings rate, expected ACO payments vary from $115,000 to $35.3 million.

Discussion: Our analysis indicates there may be greater statistical uncertainty in the MSSP than previously recognized. CMS and ACOs will have to consider this uncertainty in their financial, administrative, and care management planning. We also suggest analytic strategies that can be used to refine ACO payment formulas in the longer term to ensure that the MSSP (and other ACO initiatives that will be influenced by it) work as efficiently as possible.

Keywords: Capitation; DRGs; Health Care Costs; Health Care Financing; Health Care Organizations and Systems; Health Economics; Health Policy; Incentives in Health Care; Insurance; Law; Medicare, Econometrics; Payment Systems: FFS; Politics; Premiums; RBRVS; Regulation; Risk Adjusted Payments etc..

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Figures

Exhibit 2
Exhibit 2
Probability that an ACO is inappropriately rewarded for measured savings due to normal variation in healthcare expenditures (One-side model).
Exhibit 3
Exhibit 3
Financial risks to CMS when measured savings are driven solely by normal variation.
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References

    1. Centers for Medicare & Medicaid Services. New Affordable Care Act program to improve care, control Medicare costs, off to a strong start. 2012a Apr 10; Retrieved from https://www.cms.gov/apps/media/press/release.asp?Counter=4333&intNumPerP....
    1. Centers for Medicare & Medicaid Services. Summaries of ACOs selected for April 1, 2012 start-up. 2012b Apr 10; Retrieved from http://www.modernhealthcare.com/assets/pdf/CH79063410.PDF.
    1. Apr 7, 2011a. CMS, Medicare Program, Medicare Shared Savings Program: Accountable Care Organizations, 73 Fed. Reg. 19528. (to be codified at 42 C.F.R. pt. 425)
    1. 2011b. CMS, Medicare Program, Medicare Shared Savings Program: Accountable Care Organizations; Final Rule, 42 C.F.R. § 425.
    1. Diggle PJ, Heagerty PJ, Liang KY, Zeger SL. Analysis of longitudinal data. 2nd ed. New York: Oxford University Press; 2002.

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