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Restructuring Medicare Shared Savings Program can yield 40% savings in health costs

August 08, 2019

CATONSVILLE, MD, August 8, 2019 - More than a trillion dollars was spent on healthcare in the United States in 2018, with Medicare and Medicaid accounting for some 37% of those expenditures. With healthcare costs expected to continue to rise by roughly 5% per year, a continued debate in healthcare policy is how to reduce costs without compromising quality.

As part of this effort, the Medicare Shared Savings Program was created to control escalating Medicare spending by giving healthcare providers incentives to deliver more efficient healthcare.

New research published in the INFORMS journal Operations Research offers a new approach that could substantially change the healthcare spending paradigm by utilizing performance-based incentives to drive down spending.

The researchers Anil Aswani and Zuo-Jun (Max) Shen of the University of California, Berkeley, and Auyon Siddiq of the University of California, Los Angeles found that redesigning the contract for the shared savings program to better align provider incentives with performance-based subsidies can both increase Medicare savings and increase providers' reimbursement payments.

"Introducing performance-based subsidies can boost Medicare savings by up to 40% without compromising provider participation in the shared savings program," said Aswani, a professor in the Industrial Engineering and Operations Research Department at UC Berkeley. "This contract can lead to improved outcomes for both Medicare and participating providers," he continued.
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Link to full study.

About INFORMS and Operations Research

Operations Research is a premier peer-reviewed scholarly journal focused on the applications of operations research. The research serves the entire research community, including practitioners, educators and students. It is published by INFORMS, the leading international association for operations research and analytics professionals. More information is available at http://www.informs.org or @informs.

Contact:

Ashley Smith
443-757-3578
asmith@informs.org

Institute for Operations Research and the Management Sciences

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