Healthcare Business News

Big boost in ACO numbers

Third and largest expansion sees 106 organizations added to program

By Melanie Evans
Posted: January 12, 2013 - 12:01 am ET

Medicare entered year two of its accountable care experiment with a significant expansion, even as a top official said it was too soon to release early results.

The CMS announced last week 106 new accountable care organizations under Medicare, the third and largest expansion of a program created by the Patient Protection and Affordable Care Act and launched last April. The latest crop of ACOs nearly doubled Medicare's shared-savings program and included the drugstore giant Walgreen Co.

Medicare offers ACOs financial incentives to meet quality and cost-control targets, and as many as 4 million enrollees receive care from doctors under such contracts, or one out of 10 enrollees not enrolled in Medicare managed-care plans.

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Jonathan Blum, the CMS' acting principal deputy administrator and director of the center for Medicare, told reporters after announcing the expansion that the agency was optimistic it would reduce costs but said it would be too early to release results from 116 ACOs launched last year or another 32 ACOs operating for the past year under the Center for Medicare and Medicaid Innovation's Pioneer model.

The healthcare reform law, which seeks to significantly reduce the number of uninsured coverage through Medicaid and private-market insurance expansion, included ACOs among a limited number of initiatives that seek to curb U.S. health spending.

Medicare spending increased 6.2% in 2011 to $554.3 billion, a growth rate faster than the 4.3% growth in 2010, CMS officials said last week. The CMS estimates ACOs will save Medicare $940 million over four years.

Hospitals and doctors in Medicare's shared-savings program may select from two incentive options, including one with greater incentives but that also carries the risk of potential losses. So far, eight shared-savings ACOs have selected this option. The other shared-savings option offers no risk of losses and smaller bonuses. Pioneer accountable care contracts require all participating hospitals and doctors to be at risk for losses starting this year.

Dr. David Pate, president and CEO of St. Luke's Health System in Boise, Idaho, which was among the newly named Medicare ACOs, said his organization selected the bonus-only option but considers the ACOs an opportunity to prepare for payment models that include greater financial risk.

St. Luke's has invested in predictive modeling software to identify patients at greatest risk for costly care that could perhaps be prevented with more coordinated efforts to improve the health of chronically ill patients, he said. Medicare will supply patient data not previously available to St. Luke's, he said. “We're really hungry for this data,” he said.

The CMS said half of ACOs are physician-led and care for fewer than 10,000 Medicare enrollees, but Walgreen's entry underscores an interest in ACOs across the industry. Walgreen follows Universal American, a publicly traded Medicare Advantage and supplemental insurance provider, which also contracted with hospital and medical groups to win multiple Medicare ACO contracts last year.

Stephen Shortell, a professor of health policy and management and dean of the school of public health at the University of California Berkeley School of Public Health, said he was not surprised by Walgreen's entry into the ACO market, because better management of medications could improve care for chronically ill patients.

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