Shared Savings Demystified: What to Know and Why it’s Worth Your Attention

Article | 11/06/2023

Value-based care is revolutionizing the healthcare industry by shifting the focus from fee-for-service payments to alternative payment models that prioritize quality care and efficiency. One such model that has gained widespread adoption is the Accountable Care Organization, or ACO. 

ACOs are physician- and hospital-led organizations that take responsibility for the total cost of care for a population of patients. Through the Realizing Equity, Access and Community Health (REACH) model and Medicare Shared Savings Program (MSSP), ACOs have the opportunity to improve patient outcomes while reducing healthcare spending. 

In this article, we delve into the concept of value-based care, different ACO models, and the importance of shared savings in driving effective and sustainable healthcare delivery.  

What is Value-Based Care?

Value-based care is a healthcare delivery model that aims to improve patient outcomes while optimizing costs. It incentivizes providers to deliver high-quality, efficient care by linking reimbursement to the quality and value of services provided. Instead of the traditional fee-for-service model, where providers are paid based on the number of services rendered, value-based care encourages providers to focus on preventive care, care coordination and population health management. By aligning financial incentives with patient outcomes, value-based care promotes better care coordination, reduces unnecessary healthcare utilization and enhances patient satisfaction. 

Accountable Care Organizations

The Centers for Medicare and Medicaid Services (CMS) encourages the formation of ACOs, which are groups of healthcare providers who come together voluntarily to deliver coordinated care to Medicare patients. The goal is to improve the quality of care for Medicare beneficiaries while reducing healthcare costs. ACOs achieve this by coordinating care across various health settings, such as hospitals, doctor’s offices and other care facilities. 

When an ACO successfully provides high-quality health care and reduces spending for its patients below a benchmark cost set by Medicare, it is rewarded with a portion of the savings. This is known as shared savings. The shared savings are distributed among Medicare, the ACO, and providers within the ACO who cared for the patients.  

For example, if Medicare expects an ACO to spend $10 million on their Medicare beneficiaries in a calendar year, and they only spend $8 million on those patients instead, that generates $2 million in savings that is shared. 

The shared savings incentivize ACOs to deliver cost-effective, high-quality care, driving improvements in patient outcomes and overall healthcare efficiency. 

The Importance of Shared Savings

Shared savings play a crucial role in supporting the transition to value-based care and driving sustainable healthcare delivery. By rewarding ACOs for reducing healthcare spending, shared savings align financial incentives with the goal of delivering cost-effective care. The model also promotes collaboration among healthcare providers, incentivizing them to work together to improve patient outcomes while reducing unnecessary healthcare utilization. 

Shared savings also benefit patients in several ways. First, it helps lower their medical costs, making healthcare more affordable and accessible. By receiving care from their primary care providers or usual doctors, patients experience a higher level of comfort and continuity of care. ACOs also prioritize preventive care, ensuring patients receive routine screenings and regular appointments to detect and manage health conditions earlier, reducing the need for costly interventions in the future. Overall, shared savings contribute to a patient-centered approach to healthcare, where patients receive high-quality care at a lower cost to the healthcare system. 

Achieving Success in Value-Based Care

While shared savings have the potential to drive success in value-based care, the performance of ACOs can vary significantly. Factors such as social determinants of health, ACO model design, provider characteristics and benchmark calculations can all influence the financial performance of ACOs. Understanding these factors is essential for ACOs to optimize their performance and maximize shared savings. 

Bonus payments are a significant factor in determining ACO profitability. The baseline and benchmark for total costs, the shared savings rate, minimum savings / loss rates, and risk corridors all impact the bonus payments ACOs receive. These design elements influence the financial sustainability of ACO arrangements and shape the incentives for ACOs to perform well. The benchmark for total costs is typically based on a historical baseline, which may be one year or averaged over multiple years. The shared savings rate determines the percentage of estimated savings that an ACO receives, while the minimum savings/loss rates set thresholds for payouts. Risk corridors, provisions in healthcare legislation, limit an ACO’s gains or losses and protect against extreme situations. The frequency of rebasing, where the benchmark is reset based on prior year performance, can also impact the share of estimated savings that flow to the ACO. 

How Vytalize Drives Value-Based Care

Vytalize has ACOs that participate in the MSSP and REACH models. With a strong focus in value-based care, Vytalize prioritizes patient-centered care through partnerships with primary care providers and its preferred provider network. By aligning financial incentives with outcomes, providing smarter data and integrating into existing workflows, Vytalize aims to improve patient care and limit unnecessary spending. Our commitment to delivering high-quality cost-effective care has yielded impressive results. 

In 2022, Vytalize’s ACOs collectively saved Medicare $21 million, generating more than $14.5 million in shared savings and an average savings of $1,343 per beneficiary.  Out of 78 Standard REACH ACOs, Vytalize was one of only five to land in the top quartile for each Triple Aim measure: cost savings (83rd percentile), quality (82nd percentile) and patient experience (78th percentile). This achievement highlights Vytalize’s dedication to value-based care and its ability to deliver significant cost savings while enhancing patient outcomes and has cemented Vytalize’s REACH ACO as a leader in value-based care.  

Join Vytalize & Embrace Value-Based Care

Vytalize offers providers the opportunity to partner with a leading ACO and earn monthly payments for their value-based care activities. Unlike other ACOs that delay payment until after the CMS performance year has ended, Vytalize provides monthly payments, recognizing the great work providers are already doing on a daily basis. By joining Vytalize, physicians receive personalized data-driven insights from dedicated medical directors who collaborate one-on-one to create customized care plans that help improve patient outcomes.  

Don’t wait to embrace the power of value-based care. Partner with one of the nation’s top-performing ACOs and be at the forefront of the healthcare revolution. Experience the benefits of monthly payments, peer-to-peer support and a commitment to deliver high-quality cost-effective care. Together, we can transform healthcare and make a positive impact on the lives of patients.