Evidence of patient and physician turnover in accountable care organizations (ACOs) has raised concerns that ACOs may be earning shared-savings bonuses by selecting for lower-risk patients or providers with lower-risk panels. We conducted three sets of analyses to examine risk selection in the Medicare Shared Savings Program. 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 re-estimated savings with methods that address undetected risk selection but could introduce bias from other sources. These included patient fixed effects, baseline 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. We find that MSSP participation was associated with modest and increasing annual gross savings in the 2012-2013 entry cohorts of ACOs that reached $139-302/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 consistent results but were less robust than our primary analysis, suggesting the introduction of bias from within-patient changes in time-varying characteristics. We find no evidence of ACO manipulation of provider composition or billing to inflate savings. We further demonstrate that exit of high-risk patients or physicians with high-risk patients from ACOs is misleading without considering a counterfactual among non-ACO practices. We conclude that 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 incentives and opportunities for risk selection in the revamped MSSP will be important for guiding future program reforms.

The Medicare Shared Savings Program (MSSP) was created under the Patient Protection and Affordable Care Act to control escalating Medicare spending by incentivizing providers to deliver healthcare more efficiently. Medicare providers that enroll in the MSSP earn bonus payments for reducing spending to below a risk-adjusted financial benchmark that depends on the provider's historical spending. To generate savings, a provider must invest to improve efficiency, which is a cost that is absorbed entirely by the provider under the current contract. This has proven to be challenging for the MSSP, with a majority of participating providers unable to generate savings due to the associated costs. In this paper, we propose a predictive analytics approach to redesigning the MSSP contract with the goal of better aligning incentives and improving financial outcomes from the MSSP. We formulate the MSSP as a principal-agent model and propose an alternate contract that includes a performance-based subsidy to partially reimburse the provider's investment. We prove the existence of a subsidy-based contract that dominates the current MSSP contract by producing a strictly higher expected payoff for both Medicare and the provider. We then propose an estimator based on inverse optimization for estimating the parameters of our model. We use a dataset containing the financial performance of providers enrolled in the MSSP, which together accounts for 7 million beneficiaries and over $70 billion in Medicare spending. We estimate that introducing performance-based subsidies to the MSSP can boost Medicare savings by up to 40% without compromising provider participation in the MSSP. We also find that the subsidy-based contract performs well in comparison to a fully flexible, non-parametric contract.

The Medicare Shared Saving Program (MSSP) is a voluntary program formally implemented in 2012, which offers health care providers, such as hospitals, physicians, and other involved providers, an opportunity to form a new type of health care entity, the accountable care organization (ACO), to deliver the full continuum of care to Medicare fee-for-service beneficiaries associated with the ACO. Health care providers participating in MSSP ACOs are collectively held accountable for the quality and the total cost of care for their ACO patients. In return, they are awarded shared savings from the Centers for Medicare and Medicaid Services (CMS) based on the difference between their annual actual expenditures for assigned beneficiaries and a projected benchmark set by the CMS, while meeting minimum performance on a set of quality measures. This study focused on the three Medicare patient groups associated with the greatest use of postacute care (PAC) and a high rate of 30-day rehospitalizations; ischemic stroke patients, hip fracture patients, and elective total/partial joint arthroplasty (TJA) patients. Using the Medicare Provider and Analysis Review files from 2010 to 2016, propensity score matched difference-in-differences analyses were used to estimate the independent effect of hospital participation in the MSSP on 30-day readmission rates, institutional PAC use, and differences by race/ethnicity and payer status. We also used instrumental variable estimation to examine the causal effect of institutional PAC use on 30-day readmission rates for ischemic stroke patients. We found that MSSP-participating hospitals started showing larger reductions in readmissions in the third year after MSSP implementation for ischemic stroke or hip fracture patients, compared to non-MSSP participating hospitals. There was no evidence that MSSP had an impact on racial/ethnic disparities, but increased disparity by payer status (dual vs. Medicare-only) was observed. In addition, hospital participation in the MSSP was associated with increased institutional PAC use for ischemic stroke, but was not associated with institutional PAC use for hip fracture or elective TJA. MSSP was associated with more discharges of racial minority patients for elective TJA and dual-eligible patients for stroke to institutional PAC. We found that an increase in institutional PAC use was associated with a decrease in 30-day readmission rates. These results have important implications. Our findings suggest that MSSP ACOs may take at least 3 years to achieve reduced readmissions and may increase disparities by payer status. Also, despite the national trend of shifting postacute patients from PAC institutions to home health care, MSSP ACOs may help slow down this declining trend of institutional PAC use, especially for vulnerable patients such as racial/ethnic minorities and dual eligibles. Lastly, reducing institutional PAC use among patients typically requiring rehabilitation in institutional settings for recovery may potentially lead to adverse post-discharge outcomes that require rehospitalization.

Although private health plans were originally envisioned in the 1980s as a potential source of Medicare savings, such plans have generally increased program spending. In 2006, Medicare paid $59 billion to Medicare Advantage (MA) plans -- an estimated $7.1 billion more than Medicare would have spent if MA beneficiaries had received care in Medicare fee-for-service (FFS). MA plans receive a per member per month payment to provide services covered under Medicare FFS. For this testimony, the author examined MA plans¿: (1) projected allocation of rebates; (2) projected cost sharing; and (3) projected revenues and expenses. Charts and tables.