Value Based Care: what we can learn from those who succeeded (and failed) in Year 1 of the Medicare Shared Savings Program?

By Randall Williams, MD*

“The definition of insanity is doing the same thing over and over again and expecting different results.” — Albert Einstein

einsteinIf you want to lead your organization to success with value based care, I’d like to help you avoid the mistake of committing organizational insanity. As I’ve written before, all value based contracting will require a different and diligent focus on reducing cost. In order to win, you need a model that will help you do that. But first, there’s a lot to learn from those who succeeded (and failed) in the first year results of the Medicare Shared Savings Program (“MSSP”).

The first year impact of MSSP has received lots of attention in the media. To sum it up:

Only ¼ of all MSSP organizations achieved ANY financial success, as measured by receiving shared savings.

cms_logoThat statistic is concerning and has caused hand-wringing inside and outside the Beltway, but it is not surprising. Why? It’s simple really — most ACOs are still working on basic organizational issues like:

  • integrating their doctors
  • getting CMS claims data into a format that can be analyzed
  • documenting and reporting quality performance metrics

While that work is necessary, it is not at all sufficient. It won’t generate the cost savings required to get to the shared savings bonus opportunity. MSSP organizations, depending a bit on their size, must reduce the total beneficiary cost (Medicare Part A and Part B) by at least 2.5 – 3.5%. Yet few are focusing on doing things differently when it comes to managing their population’s utilization and costs.

Imagine the following scenario:

The average beneficiary in your ACO spends $9,000 per year.

You have 10,000 beneficiaries.

Your savings threshold is 2.8%.

In order to get into the bonus category, you will need to avoid at least $2.5 million a year in medical expenditures. That doesn’t just happen on its own.

Sounds like tough work, you say. Maybe we can’t get there, you say. But some of your peers actually accomplished that in their first year.

Were they simply lucky, perhaps having the “good” fortune of a high starting point to work from? Or might their success be a result of the Medicare reconciliation “Black Box”? Evidence and analysis elsewhere suggests these aren’t the explanations. So what is?

Medicare’s own analysis of the Year One winners (those who got bonuses) gives some important insights to the real answer. From that data, we can see that:

  • Winners saved about 6% per beneficiary overall
  • Winners reduced hospitalizations by 52%, ER visits by 41%, and inpatient costs by 69%
  • Winners achieved a 40% decrease in admissions for heart failure patients and a 25% decrease in admissions for COPD patients
  • Winners dropped hospital readmission rates by 26%

What does this mean to organizational leaders looking to achieve savings bonuses?

  • Get your organization focused on avoidable admissions and readmissions to the hospital
  • Eliminate enough admissions to drive down overall costs by >5%
  • Establish a monthly goal of averted admissions that you can measure and manage over the course of each performance year
  • And whatever else you decide to do, don’t simply assume that doing what you’ve always done will get you different results!

For other useful analysis of MSSP results, I recommend reading insights from the Brookings InstituteMedicare ACOs Continue to Improve Quality, Some Reducing Costs‘. Please feel free to share your thoughts about winning with value based care in the comment section.


Dr. Williams is the founding Chief Executive Officer of Pharos Innovations. He is responsible for setting the vision and overseeing the execution of Pharos’ mission to transform healthcare through patient engagement in self-care. He has 16 years of executive experience developing chronic care monitoring programs.

The above is a guest post originally published here.


Join the Conversation


  1. Submitted on 2015/03/03 at 1:27 pm
    Gregg Masters
    FEBRUARY 26, 2015 AT 5:54 PM
    Well done, especially the context for ‘insanity’.

    Completely agree with the emerging parameters (things we need do) you’ve laid out to scale and focus the challenge of ‘doing things differently’.

    Yet, I quibble only with the fact that ‘report card’ of this MSSP ‘shift’ (physician integration/alignment with entity mission, and the cultural, workflow process re-engineering, including the de-siloing of third party payment incentivized traditional health care delivery sites) is somewhat of a ‘O, G & E’ (organization, governance and equity) chicken dance.

    In other words via a series of gross movements over time we’ll likely witness the purposeful refinement of enabling physician culture and associated staff and MLP workflow processes to more accurately target and support the ‘cost reductions’ required to ‘win’ at this game. In the chicken dance metaphor, the subject is not quite clear what he or she did to earn the reward (truth admitted by several MSSP players at august meetings of ACOs). Perhaps not an exact metaphor, the picture works for me – but only in organizations committed to learning how to act differently.

    Attributing specific actions to ‘success’ or ‘failure’ at the equivalent of the top half of the first inning in this game is a tad pre-mature. Chance, or the low hanging fruit of payment formulas may be more of a determinant of success or failure than a mission of ‘purposeful behavior change’.

    Great piece! May I re-post with attribution on @ACOwatch?

    And if so Inclined, might we schedule you on ‘This Week in Accountable Care’ a 30 minute live Internet radio show:

    Gregg Masters

    1. Randy Williams, MD
      FEBRUARY 27, 2015 AT 4:26 PM
      Gregg, thanks for posting your comment. I think you are right about not judging winners and losers until we’ve played more than an inning of the game. Your analogy points to an important point that we think is being lost on the ACO movement. Namely, as an industry, we can’t afford to go into the 9th inning tied 0-0…no one will show up at that game!

      So the key question we’re trying to push ACO leaders to explore in the “first, second, and third innings” is “How do we score runs?” The point is this: by knowing the strike zone and understanding what kind of pitch is being thrown.

      At the risk of beating up the analogy, ACO leaders need to be a bit smarter and a bit more willing to learn from others, rather than just stepping into the batter’s box and swinging at every pitch. There are PROVEN paths to success, and the first year ACO results DO point to those paths. As does the 7 year experience of 10 “precursor” ACOs in the CMS Physician Group Practice Demonstration.

      Pharos had the unique opportunity to partner with 2 of the 10 organizations, for what I would consider several seasons of training in the minor leagues. In my next post, I’ll share more about what we learned; but to be sure, scoring a win as an ACO requires the right focus and the right approach, not just swinging at the pitch, or worse yet, not swinging at any pitches until late in the game!

      Cheers, and looking forward to chatting live very soon.

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