Life Science Compliance Update

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


November 26, 2014

ACO Update: An Opportunity for CME?, Challenges Ahead

Clinical Trials

In recent months, we have written about the expansion of Accountable Care Organizations (ACOs) across the country. An estimate indicates there are nearly 289,000 total healthcare providers and business personnel aligned with this new model for delivering care. Other studies indicate the number of patients in organizations with an ACO arrangement is between 37 million and 43 million, or about 14 percent of the U.S. population. We have also previously noted across the country, large hospital systems are buying up physician practices with the goal of becoming ACOs that directly employ the majority of their providers. Because hospitals usually have access to capital, they are better able to finance the initial investment necessary to achieve the quality benchmarks, like the creation of electronic record systems in order to track patients.

CME and ACOs

The growth of ACOs also provides an opportunity for the continuing medical education community. In a November article in Insurance News Net by Robert Meinzer, Theresa Barrett, PhD, and Ray Saputelli, MBA of the New Jersey Academy of Family Physicians, the authors argue that ACOs represent a “paradigm shift in healthcare,” and to build competencies necessary to deliver care under this new model, there must be a fundamental change in the way education is provided.

At their most basic level, ACOs and CME providers share similar goals. Both are stakeholders in improving patient and population care, and as a result, collaboration between the two is a natural fit. However, there are challenges. The article notes that ACOs are not like other organizations CME providers work with, so the education community must first understand how ACOs work before they can get these new organizations to buy into the idea that CME can help them achieve goals.

Challenges Ahead for ACOs

Hurdles between ACOs and CME providers are only one piece of the larger ACO puzzle. As we have previously written, despite the growing number of ACOs, this new model faces significant challenges moving forward. Currently, as one physician noted, there exists a “perverse payment model,” whereby the fee-for-service payment model rewards volume of services, not necessarily superior clinical outcomes. With more complicated procedures and treatment, providers are reimbursed at higher levels. Ultimately, ACO providers will need to aggressively convert their practices and revenue streams from fee-for-service to a prepaid model.

Additionally, technological hurdles prevent the successful implementation of ACOs. While ACO technology platform solutions can be both simple and difficult, ACO providers must invest in connecting their information technology systems early on to prevent redundancy of care. Physician leadership and self-governance is also important when success depends on improvements in operational performance. Hospital administrators, for example, need to embrace physician leaders as equals while investing in physician leadership development.

Promise and Peril of ACOs

The benefits and challenges faced by ACOs were also recently discussed by Fred N. Pelzman, MD. Dr. Pelzman walks through a number of important topics involving ACOs. In the implementation stage, he describes the underlying pieces that must exist in an ACO and are already found in patient-centered medical homes. He cites safe transitions of care, robust information technology tools to monitor health trends, evidence-based care, and care coordination as four examples.

He argues, however, if a patient-centered medical home model is used to build an ACO, there must be additional infrastructure and support to coordinate care and stop excessive spending. One positive of this model is that an ACO built at an institution already providing patient-centered medical care will have pieces in place to create the best possible care, limiting redundancy and possibly improving transitions of care.

Dr. Pelzman further compares and contrasts patient-centered medical homes to an ACO model, noting that patient-centered medical homes build care coordination into their practice. This allows care coordinators to ensure patient care is delivered as planned and additional services are supplied effectively. Under an ACO model, Dr. Pelzman argues the world of care coordination would increase “massively,” becoming a major focus of care teams. He describes the point of ACOs as seeking to identify high-risk patients that need reductions in duplicate care, prevention of defensive medicine, and implementation of high-quality interventions.

But his concern is that ACOs would then become yet another monitor looking over the shoulder of caregivers, scrutinizing what they spend while caring for patients and telling them what can and cannot be done to provide care. Right now, bureaucratic hurdles already overwhelm the system, Dr. Pelzman points out.


Dr. Pelzman ends his article by noting that when money enters the picture of care and becomes too significant of a presence, it has the potential to take physicians away from the most important goal: caring for patients.

If ACOs are to benefit patients, he argues they must ensure for evidence-based care to prevent unnecessary emergency room visits, prevent patients from doctor-shopping, and keep them within systems where caregivers can better take care of patients. Dr. Pelzman acknowledges there is a business side to healthcare—ultimately someone is responsible for the bottom line—but when that becomes too much of a focus, there is a fear that linking the practice of medicine to the sometimes messy nature of healthcare delivery, with the goal of saving money, may create a paradigm where practitioners are pressured to avoid providing care they think is necessary and appropriate.

Ultimately, Dr. Pelzman provides a final warning: “But we are scared of having Big Brother look at everything we spend on our patients, because someone is always going to be worried that this is going to make us lose money.”


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