ACOs Should Run for the Exits and Into Medicare Advantage

CMS recently released results from the Medicare Pioneer Accountable Care Organization (ACO) Program and the Medicare Shared Savings Program (MSSP). Once again the results are a mixed bag: quality is up, but the ROI for most participants is a joke. The update should have the most sophisticated demo sites running for the exits and into Medicare Advantage — but they need to move fast with the holidays and a February filing deadline for 2017 looming.

Pioneer ACO Program

CMS initially selected 32 health systems to participate in the program.  It’s down to 19 today. For the year 2014, 622,000 beneficiaries participated.  Findings:

  • Pioneer ACOs generated total savings of $120 million in 2014, a 24% increase from 2013 ($96 million) and $88 million in Year 1 savings.
  • Eleven health systems generated gross savings beyond the minimum goal and received performance payments totalling $82 million. That’s a pittance for what’s been invested to participate. Of the 11 companies,  a few reported notable savings:
    • Banner Health in Arizona generated roughly $18.7 million in savings
    • Partners Healthcare in Massachusetts generated roughly $13.2 million in savings, with around 70,000 beneficiaries participating.
    • Beth Israel in Massachusetts lowered costs by 3.7% and generated roughly $9.8 million in savings.
    • OSF Healthcare System in Illinois lowered costs by 3.0%
    • Michigan Pioneer ACO in Michigan lowered costs by 6.3%
    • Monarch Healthcare in California lowered costs 4.0%

Three Pioneers incurred the nightmare scenario of a giveback payment to CMS in 2014, including Beacon Health in Maine ($2.9 million), Dartmouth-Hitchcock in New Hampshire ($3.6 million), and Franciscan Alliance in Indiana ($2.5 million). All had to inform CMS of their decision to stay or exit the program by September 14. After two years of consecutive losses, Dartmouth-Hitchcock planned to exit Pioneer and apply instead for the Next Generation ACO program. It’s a black eye for the system that’s home to Dr. Elliott Fisher, widely considered to be the inventor of ACOs.  Beacon Health is also exiting the program after facing losses for two years in a row, and will also apply for Next Generation.

Total model savings per Pioneer was $6.0 million in Year 3 (2014), up from $4.2 million per ACO in 2013 and $2.7 million per ACO in Year 1 (2012).  The mean quality score among Pioneer ACOs increased to 87.2% in 2014, an improvement of 200bps from 85.2% average performance in 2013, and way ahead of 71.8% in Year 1.  The Pioneers improved on 28 out of 33 quality measures. So most are delivering the quality goods, but aren’t seeing much if any return for the effort.

Medicare Shared Savings Program

In 2014, there were 333 participants in the Medicare Shared Savings Program, and 92 of these ACOs kept spending below their targets, up from 58 ACOs out of 114 in 2013. The victorious 1/3 earned $341 million in performance payments. Takeaways:

  • $465 million of the savings generated will accrue to the Medicare Trust fund, $341 million will be returned to participants.
  • 89 ACOs actually reduced health care costs compared to their benchmark, but did not qualify for shared savings because they did not meet the minimum savings threshold.  So 2/3 of ACOs are winning on expense, but only half of those got paid. That’s a problem.
  • Veteran ACOs were more likely to generate performance payments. Twice as many ACOs that entered the program in 2012 got paid vs. freshman systems (38% vs. 19%).

Lined up alongside other innovation failures like the bundled payment and nursing home quality demonstrations, it’s clear CMS’s innovation agenda has been hobbled by poor design and lack of business acumen.  There’s never been a better time for an industry veteran like Andy Slavitt to lead the agency out of the darkness.

The clock is ticking for ACOs to make the evolutionary leap into the one “devil we know” of Medicare Advantage.



Our team of veteran executives can help your ACO evaluate the options, manage the workflow to achieve either a Medicare Advantage contract with CMS or a risk contract with an existing MA plan, and continue to achieve improved outcomes. Visit our website to learn more >>

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