GE Healthcare Camden Group Insights Blog

Pioneer ACOs: Pass or Fail, the Model is Here to Stay

Posted by Matthew Smith on May 14, 2015 1:13:38 PM

Love them or hate them, it’s that time of year when America is getting inundated with high-profile, big budget sequels. The Centers for Medicare and Medicaid Services (“CMS”) is getting in on the act with a follow-up and expansion to the controversial Medicare Pioneer Accountable Care Organization ("ACO") program that was launched in 2012. Following the recently released positive results for the program from 2012 to 2013, CMS is declaring the program a success. But then, why did over 40 percent of the Pioneer ACOs drop out of the program in the first place? And just how should healthcare providers react to this expansion news?

Launched in 2012, the Pioneer ACO Model was designed for healthcare organizations and providers who were already experienced in coordinating care for patients across care settings. Through the alignment of provider incentives to improve quality and health outcomes for patients across the ACO, the program aimed to transition more rapidly from a shared savings payment model to a population-based payment model. The Pioneer Model operated on a track that was consistent with the more popular Medicare Shared Savings Program ("MSSP"), but with greater downside risk and greater levels of shared savings for successful performance.

CMS only allowed organizations to participate that it believed to be the most experienced in care coordination and with the highest chance of success. This led to only 32 brave, inaugural ACOs, or “Pioneers,” as CMS’ first batch of participants. Since 2012, 13 of the 32 Pioneer ACOs have left the program, either exiting Medicare accountable care models completely or transitioning to the less lucrative but also “zero risk” MSSP (Track 1). The majority of ACOs who exited the Pioneer program reportedly found it too costly, too risky, or just simply too complex.

Nearly $400 Million in Pioneer ACO Savings 

However CMS recently announced that, in total, the 32 Pioneer ACOs combined for $384 million in savings over the two-year period, an average of $300 in savings per beneficiary annually. This reduction was achieved largely through a population exhibiting lower hospital utilization, incurring fewer tests and procedures, and undergoing more provider follow-ups after being discharged from a hospital. These positive results have expedited CMS’ stamp of approval for expansion to a larger population of beneficiaries.

What remains unclear is exactly how these ACOs achieved the results and how to establish a more sustainable model (the ACOs saved substantially more in 2012 than in 2013 - $280 million vs. $105 million). But what is clear is CMS’ intent with their latest exuberant declaration: ACOs and population-based payment models are here to stay.

The first wave of CMS’ commitment to promoting the shift in payment methodologies was with the proposed new Track 3 through its MSSP. CMS is currently inserting the design elements from the Pioneer ACO model into the proposed Track 3. Traditionally ACOs participating in the MSSP had two risk arrangement options: Track 1, which presented no downside risk but a lower shared savings rate; and Track 2, which offered a greater shared savings rate but came with the burden of shared losses as well. The proposed Track 3 offers a higher maximum shared savings rate in exchange for accepting greater downside risk. Track 3 proposes a shared savings rate up to 75 percent based on quality, 15 percent higher than in Track 2. However, under Track 3, the ACO’s proposed shared loss rate ranges from 40 to 75 percent based on quality.

Next Generation ACO Model

CMS also recently unveiled the Next Generation ACO model, which offers financial arrangements with higher levels of risk and reward than current Medicare initiatives. This model is an attempt to correct perceived shortcomings of the original Pioneer model with refined benchmarking methodology and improved benefit enhancement tools to help ACOs improve engagement with beneficiaries. With offerings including a selection of payment mechanisms to enable a graduation from fee-for-service reimbursements to capitation, the Next Generation ACO model is similarly targeted at seasoned care management organizations. Again, the message from CMS regarding Track 3 and the Next Generation ACO is clear – only the most experienced in care coordination need apply.

CMS is in the process of evaluating further expansion options based on the positive Pioneer results. So what can healthcare providers, hospitals, and health systems take away from these performance results and announcements in the meantime? By now it is unmistakable that CMS is committed to the shift towards population-based models using the current shared savings arrangements as a conduit. Healthcare providers and organizations need to develop a strategy on where and how they enter into the path to value-based payments. The question no longer is if, but when.

Not for the Faint of Heart

Only the most experienced organizations are prepared to try their hand at the lucrative (yet aggressive) Track 3 or the Next Generation ACO; as we saw with the early Pioneer entries, many of those will fail. But there are plenty of other entry points for organizations to dip their toes into the accountable care and value-based payment waters. The most closely aligned initiative of course is through Track 1 of the MSSP, which offers no downside risk to participants through the first three years of the program. Track 1 allows organizations to build the infrastructure necessary to coordinate care and manage a population with little financial risk. Organizations can simultaneously recruit, refine, and strengthen their clinically integrated networks without being on the hook to CMS financially should they endure growing pains and overspend their benchmark expenditure for the year.

CMS has set a target for 50 percent of Medicare payments to be shared savings or population health payment models by 2018. Organizations need to ask themselves if they are putting themselves in the optimal position to survive and thrive as the landscape shifts to these alternative payment models.

Will you have the infrastructure, care management protocols, and network to support the transformative shift to value-based care? Evaluate your market. Are there opportunities to collaborate? What are your competitors doing? Are payers approaching your market with value-based contracts? Now is the time to discuss and strategize how your organization will adapt to the evolving payer environment and whether participating in one of CMS’ Shared Savings Programs can act as the impetus for change to propel your organization to future success.

CMS has made it clear that ACOs and alternative payment models are here to stay. What’s becoming unclear is whether organizations that don’t successfully prepare themselves for that reality will be as well.

Topics: Pioneer ACO, Pioneer Accountable Care Organization

Sixty-Four ACOs Save Enough Money To Earn Bonuses

Posted by Matthew Smith on Sep 30, 2014 12:32:00 PM
Courtesy of Kaiser Health News

ACO, Accountable Care OrganizationAbout a quarter of the 243 groups of hospitals and doctors that banded together as accountable care organizations under the Affordable Care Act saved Medicare enough money to earn bonuses, according to the Centers for Medicare & Medicaid Services announced.

Those 64 ACOs earned a combined $445 million in bonuses, the agency said. Medicare saved $372 million after accounting for the ACOs that did not show success, including four that overspent significantly and now owe the government money.

The bonuses, losses and Medicare savings are teensy sums in the context of a program that spends half a trillion dollars a year on care for the elderly and disabled. But the Obama administration views the results so far as evidence that reorganizing the financial incentives for doctors and hospitals — a key element of the health law – can translate to substantial savings if the program expands nationwide.

ACOS are voluntary affiliations in which doctors and hospitals join together to coordinate care with the lure of earning extra money if they save Medicare money while maintaining the health of their patients. The program aims to encourage doctors to focus on keeping patients healthy and to intervene quickly if they are struggling, rather than waiting until they need complex — and for doctors in the old pay model, lucrative — operations or other kinds of care.

There are now more than 360 Medicare ACOs caring for about 5.6 million elderly Americans, although some of these ACOs are new enough that Medicare is not assessing their performance.

There are two types of ACO programs for which Medicare reported results. Under the largest experiment, the Medicare Shared Savings Program, 53 ACOs saved enough money for Medicare in 2013 to earn a piece of that as a bonus. On the red side of the ledger, 41 ACOs spent more than Medicare estimated they would under normal conditions. Most of these ACOs are shielded from financial penalties, but one –Dean Clinic and St. Mary’s Hospital Accountable Care Organization in Wisconsin –will have to repay Medicare $4 million because it cost Medicare $10 million above expectations.

A list of bonuses for those ACOs is available here.

For the remainder of these ACOs, Medicare either did not have final results or found spending changes so small that they might be due to fluctuations in patients’ year-to-year needs. Those ACOs received neither bonuses nor penalties.

The second, smaller group of 23 ACOs are in the Pioneer ACO Model. They have more experience, and the financial incentives are larger. Out of this group, 11 earned bonuses, Medicare announced. Three other ACOs in this Pioneer ACO Model lost money, and three more took advantage of a Medicare option that allows them to delay evaluation until after they have three years of experience.

The Pioneer results covered the second year of that program, while the performances of the other ACOs were judged for a period between 12 and 21 months, depending on when the ACO launched. Medicare announced interim results in January.

Topics: ACO, Accountable Care Organization, CMS, Pioneer Accountable Care Organization

Four More Hospital Systems Exit Pioneer ACO Program

Posted by Matthew Smith on Sep 26, 2014 2:27:00 PM

Pioneer ACO, Accountable Care OrganizationThree years after the Centers For Medicare & Medicaid Services selected 32 groups to participate in the Pioneer Accountable Care Organization Model program, they are down to 19 players. Officials say that navigating the program's rules has proved challenging. The Franciscan Alliance, Genesys PHO and Renaissance Health Network have exited the program, which is now in its third year. In August, Sharp HealthCare, San Diego, announced its decision to pull out after determining “the model was financially detrimental” despite the ACO's performance managing quality and healthcare use.

Franciscan Alliance plans to join the Medicare Shared Savings Program, said Jennifer Westfall, Franciscan's regional vice president for Franciscan Alliance Accountable Care Organization. The ACO did not get to share any savings in the Pioneer program's second year and anticipates no bonus in the third year, which prompted the organization to leave. 

“Results from 2013, our second performance year (PY2) in the Pioneer ACO, are now available from CMS,” she said. “Overall, our Pioneer ACO received a quality score rating of 83.7%. While this is indicative of strong performance, we did not do as well in meeting our benchmark for reducing the costs of patient care.”

Michael James, president and chief executive of Genesys PHO, said the Pioneer's financial formula put the Michigan ACO at a disadvantage. The ACO faced a $2.5 million penalty in the first year and $1.9 million in the second year. Genesys PHO will also apply to the shared savings program, he said. 

Following are capsules from two other articles published this week by The Wall Street Journal and Modern Healthcare, respectively.

The Wall Street Journal: A Medicare Program Loses More Health-Care Providers
Four more hospital systems recently have dropped out of the Pioneer Accountable Care Organization program, a key part of the federal health law, leaving just 19 of the original 32 participants. Accountable care organizations seek to curb costs by better coordinating care. Hospitals and groups of doctors who keep costs down for large groups of Medicare patients get to share in those savings. But navigating the program's rules has proved challenging for some hospitals, even those long experienced in coordinated care (Beck, 9/25).

Modern Healthcare: Medicare’s Pioneer Program Down To 19 ACOs After Three More Exit
Three years after CMS carefully selected 32 accountable care organizations deemed best able to manage the Pioneer program's financial risks, three more decided they no longer want to. The new departures -- the program is now down to 19 ACOs -- suggest even the most sophisticated health systems may be unwilling to take losses as policymakers test new payment and delivery models. Franciscan Alliance in Indianapolis, Genesys PHO in Flint, Mich., and Renaissance Health Network in Wayne, Pa., have exited the program, which is now in its third year (Evans, 9/25).

Topics: ACO, Accountable Care Organization, Pioneer Accountable Care Organization

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