OBJECTIVES: Understanding variation in spending across organizations, rather than across geographic areas, is important because care is delivered by organizations and interventions increasingly focus on organizations. Accountable care organizations (ACOs) are particularly important to study given their incentives to reduce spending. Analyzing spending differences across ACOs may help identify cost savings opportunities. STUDY DESIGN: Cross-sectional analysis of Medicare claims. METHODS: We stratified ACOs into quartiles based on the deviation between each ACO's risk-adjusted spending and average risk-adjusted fee-for-service spending in the same market (hospital referral region). We compared spending between top- and bottom-quartile ACOs on each of 7 major service categories and 10 clinical condition groups to identify areas of potential savings. We simulated spending reductions if ACOs with high adjusted spending reduced spending to the levels of lower-spending ACOs. RESULTS: In 2016, geographically adjusted and risk-adjusted total per-beneficiary spending for the highest-spending quartile of ACOs was 14% higher than for ACOs in the lowest quartile. Variation between high- and low-spending ACOs was greatest, at 27%, in the use of skilled nursing facilities-a service category in which ACOs have reduced spending by the greatest percentage. Inpatient care was the largest driver of absolute dollar differences in spending, however, accounting for 37% of the total spread. If spending in ACOs above median adjusted spending were brought down to the median, savings would be 3% to 4%. CONCLUSIONS: By extending the variations literature to focus on ACOs, we illustrated that meaningful further savings opportunities exist both within and across markets.
OBJECTIVES: Understanding variation in spending across organizations, rather than across geographic areas, is important because care is delivered by organizations and interventions increasingly focus on organizations. Accountable care organizations (ACOs) are particularly important to study given their incentives to reduce spending. Analyzing spending differences across ACOs may help identify cost savings opportunities. STUDY DESIGN: Cross-sectional analysis of Medicare claims. METHODS: We stratified ACOs into quartiles based on the deviation between each ACO's risk-adjusted spending and average risk-adjusted fee-for-service spending in the same market (hospital referral region). We compared spending between top- and bottom-quartile ACOs on each of 7 major service categories and 10 clinical condition groups to identify areas of potential savings. We simulated spending reductions if ACOs with high adjusted spending reduced spending to the levels of lower-spending ACOs. RESULTS: In 2016, geographically adjusted and risk-adjusted total per-beneficiary spending for the highest-spending quartile of ACOs was 14% higher than for ACOs in the lowest quartile. Variation between high- and low-spending ACOs was greatest, at 27%, in the use of skilled nursing facilities-a service category in which ACOs have reduced spending by the greatest percentage. Inpatient care was the largest driver of absolute dollar differences in spending, however, accounting for 37% of the total spread. If spending in ACOs above median adjusted spending were brought down to the median, savings would be 3% to 4%. CONCLUSIONS: By extending the variations literature to focus on ACOs, we illustrated that meaningful further savings opportunities exist both within and across markets.