Elevance Health ACO Generated Cost Savings Among Fully Insured Members

December 08, 2022 - Elevance Health’s commercial accountable care organization (ACO) program was associated with significant cost savings between 2016 and 2021, particularly among the fully insured population, according to a Health Affairs study.

ACOs aim to create greater provider collaboration and accountability while offering financial incentives for providers to reduce healthcare spending and use.

Elevance Health launched its ACO model, the Enhanced Personal Health Care (EPHC) program, in 2012. Since then, the payer has expanded program eligibility to reach providers in 15 states: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Massachusetts, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin.

The medical cost target model is upside risk-only for most providers, though around 20 percent are in downside arrangements. Providers can share in savings if their members have lower healthcare costs than projected and if they maintain or improve care quality over a one-year period.

Researchers analyzed Elevance Health’s commercial fully insured and administrative services-only populations in the 15 states between the third quarter of 2016 and the first quarter of 2021 to determine if the ACO model generated cost savings.

Between 2017 and 2020, the number of EPHC members decreased by 4 percent and the number of non-EPHC members fell by 24 percent. The fully insured EPHC population ($611.81) had higher total per member per month (PMPM) spending compared to the administrative services-only population ($479.26).

The study identified a quarterly overall PMPM savings of -$0.52. There was an overall quarterly PMPM savings of -$1.24 for the fully insured population and -$0.23 for the administrative services-only population.

Quarterly savings were not significant for inpatient spending, but the model generated $-0.48 PMPM quarterly savings overall for outpatient spending and -$0.76 for the fully insured population.

Professional spending increased by $0.25 PMPM, while spending within the administrative services-only ($0.23) and fully insured populations ($0.17) rose insignificantly.

Overall quarterly pharmacy savings amounted to -$0.19 PMPM and was -$0.62 PMPM for the fully insured population.

Additionally, the analysis revealed that EPHC providers were associated with better medication adherence. This reinforces previous findings that identified a connection between value-based contracting and improved medication adherence among patients with chronic conditions.

Researchers found a statistically significant decline in outpatient visits per 1,000 for the fully insured populations but not for the administrative services-only population or inpatient visits for either group.

EPHC program participation was associated with an overall spending reduction of -$18.25 and a reduction of -$27.37 in the fully insured population, the study found.

For the fully insured population, savings ranged from -$25.42 PMPM in 2016 to -$44.08 PMPM in 2020. Savings from outpatient and pharmacy use grew across the study period, while savings from inpatient and professional use decreased.

Savings within the administrative services-only population grew from -$11.74 in 2016 to -$15.20 in 2020.

In addition to generating cost savings, the ACO model was associated with improved care quality. EPHC providers were associated with better performance across nine of the seventeen quality measures compared to non-EPHC providers during all years of the study period.

EPHC providers had higher rates of cervical cancer screening, breast cancer screening, childhood immunizations, pediatric well-care visits, diabetes-related testing, and the proportion of days covered for hypertension.

Savings were higher in the fully insured population than in the administrative services-only population because most fully insured members had prescription coverage, which saw almost half of the savings growth, researchers said.

In addition, the fully insured population was more likely to be enrolled in consumer-directed health plans and plans with a tiered network, which are designed to limit healthcare costs.

Elevance Health has continued to expand its ACO model, generating consistent savings and quality improvements. However, the study noted that not all ACO arrangements will benefit providers the same way.

“Payers should therefore prudently identify opportunities for expansion or offer enriched support resources to providers in existing arrangements,” researchers concluded. “Furthermore, payers should monitor savings opportunities for themselves, providers, and their members as continued efforts are made to contain rising healthcare costs.”