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Medicare pioneer ACOs save money but lose physicians

The accountable care organizations generate nearly $33 million in savings, but long-term viability of the pioneer program is questioned as groups seek lower-risk models.

By Charles Fiegl — Posted July 29, 2013

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Physicians in nine large groups have dropped out of Medicare's pioneer accountable care organization initiative after just one year of participation, but health policy officials and doctors leading ACO groups said they are not turning their backs on coordinating care for beneficiaries.

The 32 pioneer ACOs cut costs for Medicare by 0.3% in 2012 while similar patient populations outside of the initiative experienced spending increases of 0.8%. The success of saving nearly $33 million for Medicare risked being overshadowed by the quick exit of the nine groups. However, none of these institutions said it was abandoning the strategies pursued in the pioneer program for population health management.

Groups that have dropped out had reviewed shared savings contracts with private payers and Medicaid programs and questioned ongoing participation in the pioneer initiative, said Tom Cassels, executive director of the Health Care Advisory Board in Washington. “In several cases, it didn't align with pioneer.”

Seven pioneer ACOs are applying to participate in the Medicare shared savings program, which is a similar project with less downside risk. Two groups are leaving altogether, according to the Centers for Medicare & Medicaid Services. Two pioneers had to pay penalties of $4 million for failing to contain spending, but CMS is not releasing the names of these groups because the results are preliminary.

At least one exit from the program raises questions about the long-term viability of two-sided ACO risk models. The University of Michigan Faculty Group Practice is leaving after being part of three versions of Medicare shared savings payment models since 2006. The university group was one of two organizations to produce savings annually during the five-year Medicare physician group practice demonstration project, and saved $22 million.

The group continued to generate millions in savings during a two-year transition program before signing up for the pioneer model. Each year, the benchmarks would change, and saving money became more difficult, said David Spahlinger, MD, executive director of the university's faculty group practice. In the first year of the pioneer program, it reduced spending by 0.3%.

“How many dollars can we take out of the system?” Dr. Spahlinger said. “There still are opportunities, but they're hard and take time.”

The Michigan ACO will merge with a larger statewide organization created in 2013 and continue to care for more than 100,000 beneficiaries assigned to the Medicare shared savings program. Larger ACOs have lower chances of paying penalties that are due to random variation in the Medicare population, Dr. Spahlinger said.

Physician Health Partners in Denver also will leave the pioneer initiative for the shared savings program after citing concerns about the pioneer financial risk structure. Key reasons drawing the group to the shared savings plan were less exposure to penalties and the opportunity to offer more services to patients, said Steve Krebs, MD, the group's chief medical officer, in a statement.

“At the end of the day, our goal is to improve the care for our patients, and we are obligated to do everything we can to make that happen,” Dr. Krebs said. “We believe in the ACO model and are on board to continue down that path with CMS. It just won't look exactly like the pioneer ACO model.”

Trailblazing a path to Medicare savings

The physician-owned and -governed Brown & Toland Physicians in San Francisco had 200 doctors overseeing care for 18,000 assigned Medicare patients and managed to contribute $10.6 million back to Medicare during its first year, said Keith Pugliese, the group's vice president of accountable care and public policy. Its ACO is not linked with a facility, but it focuses on interventions with patients following hospital admissions or emergency department care. In addition, the practice uses computer models to identify patients who are at risk of readmissions.

For instance, a nurse might meet with an 85-year-old beneficiary aligned with the ACO at the patient's home after release from the hospital, Pugliese said. The nurse will perform a medication reconciliation check and walk through the home to ensure that there are no dangers that could lead to a fall or injury. The nurse will continue to check in with family members or caregivers to improve care quality.

The American Medical Association supported ACO programs that have allowed physicians practicing in groups of various sizes to participate in new care models. The first-year pioneer results are encouraging, and have the potential to improve quality and decrease costs, said AMA President Ardis Dee Hoven, MD. At the same time, she said, Medicare needs to stay flexible, as the pioneer program shows there is no one-size-fits-all approach to health care.

“It's important for stakeholders and policymakers to continue working to develop a range of new payment and delivery models that are accessible for physicians in all specialties, practice sizes and settings — and we believe there is real opportunity for Congress to take action on this front this year,” Dr. Hoven said.

Physicians with Beth Israel Deaconess Care Organization in Boston saved 4.2%, or $7.8 million during the first year. Physicians focused on a comprehensive care management strategy, sophisticated health technology and primary care to achieve positive results. Currently, the physicians are implementing a disease management strategy in areas that include palliative care, kidney disease, heart failure and behavioral health, said Richard Parker, MD, the ACO's chief medical officer.

“There is not one silver bullet,” Dr. Parker said. “There are a collection of initiatives needed to improve performance.”

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ADDITIONAL INFORMATION

Successes of the ACO early adopters

The Centers for Medicare & Medicaid Services promoted the achievements of the pioneer Medicare accountable care organization program after the first year of operation for the payment model. The pioneer ACOs sought to coordinate care better and improve quality, while aiming to lower costs compared with benchmarks based on previous spending on patients linked to the groups. CMS reported that:

  • 669,000 patients were aligned to pioneer ACOs.
  • 13 ACOs shared savings by cutting gross spending by $87.6 million.
  • $76 million was awarded to pioneers for providing coordinated, quality care.
  • 70,000 hospital readmissions were avoided.
  • 25 ACOs generated lower risk-adjusted readmission rates.
  • All 32 ACOs reported quality measures successfully.

Source: “Pioneer Accountable Care Organizations succeed in improving care, lowering costs,” Centers for Medicare & Medicaid Services, July 16 (link)

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The 9 ACOs leaving the pioneer program

Fourteen of the 32 pioneer Medicare accountable care organizations generated losses in 2012. Only two paid penalties because they chose payment arrangements that included financial risk and had shared losses that were outside a statistical margin of error. Groups leaving the program are:

  • Prime Care Medical Network Inc., San Bernadino and Riverside counties, Calif.
  • University of Michigan Faculty Group Practice, southeastern Michigan
  • Physician Health Partners LLC, Denver
  • Seton Health Alliance, Austin, Texas, and surrounding counties
  • Plus (North Texas Specialty Physicians and Texas Health Resources)
  • Healthcare Partners Nevada ACO LLC, Clark and Nye counties
  • Healthcare Partners California ACO LLC, Los Angeles and Orange counties
  • JSA Care Partners LLC, Orlando, Tampa Bay and surrounding south Florida
  • Presbyterian Healthcare Services, central New Mexico

Source: Centers for Medicare & Medicaid Services

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