(Story updated with comment and additional information at 4 p.m. ET.)

HHS on Monday announced the 32 organizations the agency selected from among 80 applicants to participate in the Pioneer accountable care organization model. Overseen by the CMS Innovation Center, the Pioneer ACO model will test the effects of several payment arrangements to support these groups in providing better care and outcomes at a lower cost, according to HHS, which estimated the project could save up to $1.1 billion over five years.

“It's not easy to change ways of delivering care that have been in place for decades,” HHS Secretary Kathleen Sebelius said at a news conference. “But these pioneer health organizations have agreed to take on the challenge.”

The Pioneer ACOs representation could improve care for about 860,000 Medicare beneficiaries, according to HHS officials, beginning Jan. 1, 2012. The savings estimates have increased from the $430 million three-year savings CMS officials said they expected when the model was announced earlier this year primarily due to the greater than expected number of Medicare enrollees that participant providers are expected to serve, said Dr. Richard Gilfillan, director of the Center for Medicare and Medicaid Innovation.

In its list of chosen organizations (DOC), HHS noted that the groups were selected for their “significant experience” in offering coordinated, patient-centered care and operating in ACO-like arrangements. The groups participated in an open, competitive process in which HHS received 160 letters of intent and 80 applications.

Part of the selection was based on providers agreeing to ensure that up to half of their income will come from similar private-payer models. Future changes to the Pioneer model are likely, Gilfillan said, as HHS officials tweak the program to improve it.

“These organizations are not just agreeing to new working agreements and arrangements with CMS, they are agreeing to be part of a larger movement toward new models of care for all Americans,” Gilfillan said.

Among those chosen Phoenix, Ariz.-based Banner Health Network, an integrated delivery system that includes 13 acute-care hospitals; the Beth Israel Deaconess Physician Organization, which has more than 1,600 physicians, including 400 primary-care doctors; and the Dartmouth-Hitchcock ACO, a healthcare delivery system composed of Mary Hitchcock Memorial Hospital and Dartmouth-Hitchcock Clinic that serves patients in New Hampshire and Eastern Vermont.

Several of their leaders attending the Monday announcement in Washington expressed both optimism and caution about their participation in the program.

Dr. Mark Girard, president of Steward Medical Network, said the Pioneer approach dovetails with his own system's efforts to increase care coordination and control costs.

“What we're trying to do is to slow down the rate of increase so it is sustainable with the rate of growth of our economy,” Girard said.

Dr. Gene Lindsey, president and CEO of Atrius Health, said his organization willingly plans to spend about $10 million for improvements that it expects to reduce healthcare costs by up $20 million over five years because “we think this is the future.”

“If you're looking at this as a way to get rich, then it is not” the way, Lindsey said. "If you are looking for a way to prepare for what will ultimately be a declining revenue base, then it makes sense."