October 12, 2023

Understanding an ACO Benchmark & Your Opportunity to Earn Savings

Benchmarks under the MSSP and ACO Reach Programs are extremely complicated and nuanced. They should be considered carefully as they are not created equally, and it can be difficult to make an “apples-to-apples” comparison across various ACOs.

Here are several important questions to consider:

1.  What is a benchmark?

A benchmark represents the average cost of care of a population based on the prior experience of participating providers, then trended forward to "today's dollars." CMS determines an ACO’s benchmark and compares actual cost of care during a performance year against it to determine is savings or losses were created.

2.  Isn’t a higher benchmark better?

Common sense would lead most to believe that a higher benchmark creates greater opportunity to generate savings, but a higher benchmark also correlates to a higher risk and higher cost population under management, making it difficult to compare benchmarks offered by different ACOs.

Before selecting an ACO, a provider must understand what portion of their population are likely to be assigned to the ACO and whether they had enough time with the assigned patients during the performance year to intervene to improve cost and quality outcomes. This is especially critical for providers who treat patients in facility vs. community settings, as many of these patients transition into and out of a provider’s care during any given year. Once a patient is assigned to the provider in an ACO, they are assigned for the full performance year, regardless of whether there was a portion of time during which the patient wasn’t under the provider’s care. For example, patients who recently move into an institutional nursing facility care are 30-40% more costly than longer-term facility residents, yet they are not under a facility provider’s care during the full calendar year in which they were admitted to a facility.

Disconnects like these during the performance year create financial, actuarial, and execution risk which must be assessed when evaluating the probability of earning savings under an ACO’s benchmark. The more stable the patient population under management is, the higher degree of confidence a provider and ACO will have in their ability to earn savings during the performance year.

3.  Is the ACO benchmark representative of your group's historical costs?

If the answer is no, your population is significantly different from the ACO’s existing participants, which should be a red flag. While you may have a handle on your costs, the other groups participating in the ACO may not, which may put the entire ACO’s ability to generate savings at risk. If the ACO doesn’t generate savings, they will be unable to pay you even if you performed well.

4.  Has the ACO generated savings in the past and distributed savings to its participating providers?

If the answer is no, that ACO’s model is unproven and providers should apply a level of healthy skepticism on claims that seem too good to be true. Conduct due diligence to research and consider the experience of other ACOs serving your patient population to learn the factors which have led to success and/or failure of those programs. This will undoubtedly lead to more informed decision making for your group.