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November 13, 2015

Accountable Care Organizations Prove They are Here to Stay

One of the key missions of the Affordable Care Act is to slow the rising cost of health care. The Obama administration believes ACOs represent one of the most promising reforms in the 2010 law. With this in mind, the administration set a goal that by the end of 2018, half of Medicare spending currently based on the volume of procedures a doctor or hospital performs will instead be linked to quality and frugality. To help promote value of care over volume, Medicare encourages doctors, hospitals, and other providers to form accountable care organizations (ACOs) to coordinate the care of beneficiaries and provide efficient services. To incentivize these programs, an ACO that saves the government money and meets quality standards can be entitled to a share of the savings.

We have previously written about the challenges facing CMS and ACOs across the country. Recently, the GAO analyzed ACOs' spending benchmarks, amount saved and lost, and payment amounts for shared savings or losses. The GAO found that fewer than half of the ACOs in the Pioneer ACO program earned shared savings in 2012 and 2013, although overall the Pioneer ACO Model produced net shared savings in each year.

Are ACOs a success story?

To help answer this question, Kaiser Health News asked several ACO experts if ACOs are working. The answers illustrate the problems facing ACOs, such as the institutional behaviors learned from fee-for-service models. "The program started off slowly. Changing the behavior of doctors from fee-for-service to a value-based environment involves changing in some cases 30, 40 years of behavior and doesn't happen overnight. It's very, very hard work. The doctors who embrace it find it very challenging," wrote Richard Barasch, the Chairman and CEO of Universal American Corp.

Robert Murray, President of Global Health Payment was pessimistic, writing that ACO performance indicates they have not been successful. "A lot of people have characterized the results as lackluster at best, and I think things are even worse than that. Medicare's performance data ignores the fact that each of these ACOs made very substantial investments in infrastructure: new data systems, care management and care coordination systems that probably run anywhere between 1 and 2 percent of their target budget. If you apply that to the results of the ACOs, you would find that even a significant proportion of those meeting Medicare's goals would be underwater financially," he said.

Notably, Sean Cavanaugh, Deputy Administrator for CMS was more optimistic. He cited a number of measurements indicating success stories within ACOs, arguing that the initiatives "are off to a successful start because beneficiaries are receiving measurably better care and the trust funds are saving money."

Dartmouth-Hitchcock exiting Pioneer ACO program, calls model 'unsustainable'

To illustrate the challenges facing ACOs, one need not look further than recent news from the Dartmouth-Hitchcock Medical Center. The Center plans to leave the Pioneer Accountable Care Organization after losing more than $3 million over the past two years. However, the ACO does hope to join CMS's Next Generation ACO model in 2016.

The report notes that the hospital owed $3.6 million for Year 3 for spending above its benchmark, according to results released by CMS. Dartmouth-Hitchcock also owed $1.4 million from Year 2. After reconciling the figures with CMS, the hospital was expected to write a check to the government for an estimated $3.7 million. This is despite the fact that the hospital had what is considered good quality scores.

Beacon Health in Maine, while obtaining the second highest quality scores, owed $2.9 million, and Franciscan Alliance in Indiana owed $2.5 million, according to CMS.

CMS data: ACOs work

In late-August CMS released the quality and financial performance results for Medicare Accountable Care Organizations for 2014. CMS touted that Medicare ACOs continued to improve care while slowing growth in health care costs. Several key findings from the CMS report regarding the Pioneer ACO Model:

(1) In 2014 there were 20 ACOs participating in this Model.

(2) These ACOs were accountable for 622,265 beneficiaries, a two percent increase over 2013.

(3) Their total savings to the Medicare Trust fund amounted to $120 million.

(4) CMS claims 11 of the 20 ACOs earned the right to share $82 million in shared savings payments.

(5) CMS calculates that the total savings per ACO amounted to $6.0 million 2014, up from $4.2 million in 2013, and $2.7 million per ACO in 2012.

(6) CMS also reported that the mean quality score among Pioneer ACOs increased to 87.2%, reflecting improvements in 28 of the 33 quality measures. Improvement was reported in medication reconciliation, screening for clinical depression and use of electronic health records.

CMS reported positive results for MSSP ACOs:

(1) 333 ACOs participated in 2014, and 92 ACOs (27.6%) earned shared saving performance payments, totaling $341 million.

(2) 152 of the 333 ACOs did not meet or beat their cost benchmarks.

(3) The total savings to Medicare Trust Fund from the MSSP was $465 million.

(4) CMS reported that MSSP ACOs improved on 27 of the 33 quality measures, with particular improvement noted in patient ratings of clinician communication, patient ratings of their physicians, screening for tobacco use and cessation, and screening for high blood pressure.

(5) CMS also noted that ACOs who had more experience in the MSSP were more likely to earn a payment of shared savings.

What does the future look like for ACOs?

Despite these conflicting assessments of ACOs, it is clear they are here to stay. The Department of Health and Human Services' is betting several years of its policy programming on ACOs, recently announcing that it will tie half of fee-for-service payments to alternative payment models like ACOs by 2018. And despite problems with the Pioneer ACO, CMS announced an expansion of the program. CMS is also close to naming the first cohort of Medicare's Next Generation ACOs, according to Dr. Patrick Conway, acting principal deputy administrator and chief medical officer at CMS.

FiereceHealthcare recently reported on the recent history and rise of ACOs, citing Risa Lavizzo-Mourey, M.D., president and CEO of the Robert Wood Johnson Foundation. "In less than five years, ACOs have transformed from an academic idea to a tangible model that has been implemented across the U.S. By realigning financial structures and redirecting care delivery to be more patient-centered, ACOs have given providers more accountability in the care of their patients," Lavizzo-Mourey said. FiereceHealthcare notes that quality and cost improvements among ACOs under both Medicare and commercial payers will encourage growth in the ACO market.

New Jersey's ACOs illustrate the challenges facing future growth, particularly at the local and state level. Currently, the state is the first year of the three-year Medicaid ACO demonstration project. As reported, there is a sense of urgency to find sustainable funding for the ACOs.

"We recognize that Medicaid dollars or other government funds -- either directly from the state or through the managed-care companies -- must be made available for ACO activities," said Joan Randell, the COO of The Nicholson Foundation, which has helped fund the launch of the ACOs. She noted CMS has given states broad latitude to support ACOs. While her foundation will continue to support these organizations, without more outside funding the ACO model "is at risk of not thriving in the short term and not being sustainable in the long term."

Ultimately, CMS officials note most ACOs are still in their infancy, and believe that performance and savings will improve with experience. "In the long run we're shooting to achieve those goals," Sean Cavanaugh, CMS' deputy administrator, said in an interview.

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