Healthcare Technology Featured Article

July 23, 2013

More Than a Quarter of Pioneer ACOs to Leave the Program

The first-year look under the hood is in for the 32 Medicare Pioneer Accountable Care Organizations (ACOs). Most are making a go of it, as least so far. But because nine of them didn’t produce enough savings this first year, they will be doing something else next year. Seven will be leaving the flagship Medicare ACO program to enter the Medicare Shared Savings Program (MSSP). Two are dropping out entirely, according to the Centers for Medicare & Medicaid Services (CMS).

While CMS didn’t say which of the nine ACOs in question fall into which bucket, they did name names: Primecare Medical Network, University of Michigan, Physician Health Partners, Seton Health Alliance, Plus (North Texas Specialty Physicians and Texas Health Resources), HealthCare Partners Nevada ACO, HealthCare Partners California ACO, JSA Care Partners and Presbyterian Healthcare Services. 

This has everyone wondering what happened. Details have not been forthcoming, either from CMS or the ACOs themselves. Based on our work in the ACO ecosphere, we can make a few educated guesses on problem areas (in increasing order of importance) and what’s next.

  • It happens. In any new initiative, a certain proportion of participants will wash out. It’s inevitable, but not to the extent of nine out of 32.
  • Vendor issues. Getting the right vendor system in place at the right time is a critical success factor. Mature implementations—or lack thereof—can make or break a start-up ACO.
  •  Culture clashes. Changing an entrenched culture is difficult enough in one organization. Bringing disparate, well-established organizations into a single ACO and creating uniformity across operations and cultures is easier said than done. It doesn’t happen overnight. Successful ACOs will have to manage both cultural shifts and operational changes. The transition into a single ACO culture must be planned for and managed. Winning over the hearts and minds of the new ACO participants will take leadership as well as resources.
  • The bottom line imperative. The fate of the remaining 23 Pioneer ACOs rests on their ability to meet quality and cost targets. Quality doesn’t seem to be a problem. All achieved quality benchmarks and earned incentive payments for reporting their progress (as did the nine that are leaving the program). It comes down to the bottom line. The two Pioneer ACO dropouts racked up losses of $4.0 million between them. Financial problems likely motivated the other seven to alter their business model next year. Of the remaining 23 ACOs, only 13 produced enough savings that could be shared with CMS. They totaled savings of $87.6 million in 2012--and about $33 million for Medicare. This was due to in part to reductions in hospital admissions and readmissions.
  • Exit strategy needed. Even successful ACOs should have an exit strategy. It’s a contingency if revenues don’t materialize down the line. More importantly, the Pioneer project is over sooner rather than later: Pioneer ACOs signed up for three years and a potential maximum of five years. There are possibilities for what happens next. Leaving the program altogether is an option, as is dropping back to the MSSP. Former Pioneer ACOs potentially could continue as ACOs, but not under CMS sponsorship. Or they could negotiate risk contracts with a Medicare Advantage (MA) plan. As many pointed out early on, MA plans appear to be eerily similar to Pioneer ACOs.

Edited by Rich Steeves

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