Life Science Compliance Update

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.

June 08, 2015

Results from the First Two Years of the Pioneer Accountable Care Organization Model


On May 22, the Government Accountability Office (GAO) released a study evaluating the financial and quality outcomes for each accountable care organization (ACO) within the Pioneer Accountable Care Model for 2012 and 2013. The Pioneer ACO was created under the Affordable Care Act and is made up of health care providers and suppliers that voluntarily form individual ACOs to provide coordinated care to patients. The ultimate goal of this, and other ACOs, is to reduce spending and improve quality of care.

The Pioneer ACO model allows ACOs to earn additional Medicare payments if they generate savings but must pay CMS a penalty if spending is higher than expected. In this study 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.

The GAO report’s overview notes that 41% of the ACOs produced $139 million in total shared savings in 2012, and 48% percent produced $121 million in total shared savings in 2013. In 2012 and 2013 CMS paid ACOs $77 million and $68 million, respectively, for their shared savings. The Pioneer ACO Model produced net shared savings of $134 million in 2012 reflecting 2 percent of total expenditures for all 32 ACOs that participated in 2012. In 2013, it produced net shared savings of $99 million reflecting 1.4 percent of the total expenditures for the 23 ACOs that participated. The GAO also found that ACOs that participated in both years had significantly higher quality scores in 2013 than in 2012 for 67 percent of the quality measures.

ACOs with higher levels of prior spending likely had more capacity for achieving cost savings in the first two years of the model, for example, by reducing unnecessary services. As part of the GAO’s analysis, it compared the average expected expenditures (the spending benchmarks) for the Pioneer ACOs that achieved shared savings to the average expected expenditures for those ACOs that did not produce shared savings. In each year, GAO observed that the ACOs with shared savings had average expected expenditures that were about $1,100 higher, per beneficiary, compared to those ACOs that did not generate shared savings, absent other differences. For example, in 2013 the average expected expenditures for the 11 ACOs with shared savings ($12,426) was $1,160 higher, per beneficiary, than the average expected expenditures for the 12 ACOs without savings ($11,266).

The Department of Health and Human Services (HHS) provided technical support to assist the GAO in this study. HHS also offered general comments on the report. In its response, the agency stressed its commitment to ACOs like the Pioneer Model, calling it an “innovative initiative that is being used to test the impact of different payment arrangements in helping organizations who already have experience operating in ACO-like arrangements achieve the goals of providing better care to patients, and reducing Medicare costs.” HHS highlighted the fact that ACOs participating in the Pioneer Model for 2012 and 2013 had higher quality scores for a majority of the measures in the second year. Aside from trumpeting positive data, HHS concluded by stating the CMS will continue to test payment models that “incentivize providers to improve patient care and lower costs.”

With the recent MACRA SGR repeal legislation pushing physicians to choose between an unclear merit-based formula and alternative payment models like ACOs, it will be increasingly important to monitor developments in programs like the Pioneer Model. HHS continues to push post-Affordable Care Act projects, like their Health Care Payment Learning and Action Network, which strives to move healthcare from fee-for-service to quality and value-based care. We will continue to monitor these issues throughout the coming years.

January 27, 2015

Secretary Burwell Announces HHS Quality Payment Goals, Introduces Timeline For Shifting Medicare Reimbursements From Volume to Value


Big changes are on the horizon in how Medicare reimburses healthcare providers. Yesterday, the Secretary of Health and Human Services (HHS), Sylvia Burwell, announced a timeline and measurable goals to move the Medicare program toward reimbursing providers based on the quality, rather than the quantity, of care they give their patients. 

The shift from the traditional fee-for-service Medicare payment structure to a more outcome-based model hinges on "alternative payment models." These payments emphasize patient outcomes over getting paid for individual medical services, notes Burwell. "In alternative payment models, providers are accountable for the quality and cost of care for the people and populations they serve moving away from the old way of doing things, which amounted to 'the more you do, the more you get paid.'"

In 2011, Medicare made almost no payments to providers through alternative payment models, according to HHS. Today, alternative payments tied to "quality" represent approximately 20 percent of Medicare payments. HHS aims to get that up to 30 percent by the end of 2016, and 50 percent by the end of 2018. 

Burwell expounded upon these models in yesterday's blog post announcing the government's plan: 

[T]hrough Accountable Care Organizations, providers partner together on a patient’s care and get rewarded for delivering better care while spending less. In a Patient Centered Medical Home model, instead of doctors working separately in their own siloes, care coordinators oversee all the care a patient is getting.  That means patients are more likely to get the right tests and medications rather than getting duplicative tests, procedures, etc. These medical homes typically offer patients access to a doctor or other clinician 7 days a week, 24 hours a day including through extended office hours on evenings and weekends.

Another example is a “bundled payment” model.  In this model, providers are reimbursed together for the entire cost of what’s called an “episode of care” – something like say a hip replacement.  So lab tests, pre-visits, hip replacements, and so forth are all paid for in the same lump sum – whether the same test is conducted once, twice or five times.  This creates an incentive to deliver better care that makes patients healthier and keeps them out of the hospital.

A major aspect of the government's effort relies on incentives to drive providers to these alternative payment models. Burwell lists two other strategies. First is a focus on "care delivery," which Burwell indicates will be developing policies to encourage greater integration within practice sites, coordination among providers, and attention to population health with a priority on prevention and wellness. “With more emphasis on coordinated care, patients are more likely to get the right tests and medications rather than taking tests twice or getting procedures they do not need,” her announcement states. Second, CMS is also working on information sharing to create more "transparency on the cost and quality of care, to bring electronic health information to inform care, and to bring the most recent scientific evidence to the point of care in order to bolster clinical decision-making."

HHS also announced the creation of a Health Care Payment Learning and Action Network, through which HHS will work together with private payers, employers, consumers, providers, state Medicaid programs, and other partners to expand alternative payment models beyond Medicare. 

A blog announcing the new value goals from Secretary Burwell is here, and a perspectives piece in the New England Journal of Medicine from Secretary Burwell is here.


The response to the reforms has been cautiously optimistic.  American Medical Association President Robert Wah said many of his members were frustrated and anxious about changes in the system and that while he was “encouraged” by the announcement, physicians needed more flexibility in the way the payments would be administered to be able to participate, the Wall Street Journal reports

Pharmaceutical Research and Manufacturers of America (PhRMA) president and chief executive officer John J. Castellani issued the following statement on Secretary Burwell’s announcement:

“PhRMA supports Secretary Burwell’s goal of advancing affordable, high quality and patient centered health care, and today’s announcement represents an important step forward."

“New medicines make important contributions to value in health care for patients, payers and policymakers, and we look forward to working with the secretary on this new initiative. As HHS works to evaluate and expand new models of health care payment and delivery, we believe it is essential they:

1)    Incorporate clear mechanisms for recognizing the value of new treatment advances, such as precision medicine and other new tests and treatments;

2)    Are grounded in strong quality measures and incentives, with emphasis on outcomes that matter to patients;

3)    Support shared decision making between providers and patients, which is informed by high quality evidence about the full range of available treatment options; and,

4)    Are transparent and enable manufacturers and other stakeholders to work collaboratively in support of high-quality, high-value health care.

Read PhRMA's Principles for Payment Delivery and Reforms here



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