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Risk was too great
Some Pioneers were unable to hit savings targets

By Melanie Evans
Posted: July 20, 2013 - 12:01 am ET

Meeting cost-saving targets and earning a bonus under Medicare's Pioneer accountable care experiment eluded more than a dozen participants in the program, and the risk of future losses prompted some to race for the exit.

For some Pioneers, including Texas-based Plus and Albuquerque-based Presbyterian Healthcare Services, the decision to leave grew out of what their executives called bad timing or limited opportunities to score savings because of Medicare's formula for awarding ACO shared-savings bonuses.

Texas Health Resources, which owns 13 Texas hospitals, and North Texas Specialty Physicians, which jointly formed an ACO called Plus, said last week that their Medicare ACO effort would not continue unless “we can find an economically viable way to do so.” The organization will continue to pursue commercial ACO contracts.

Plus was one of 14 Pioneer organizations that ended the program's first year last December without meeting Medicare's cost-saving target, a key requirement for earning a shared-savings bonus.

Wendell Watson, a spokesman for Texas Health Resources, said Plus' decision to leave the program was driven by the heightened financial risk that Pioneer ACOs faced at the start of this year. Pioneers agreed to contracts that increase their financial gains and risks with each year. The three-year contracts may be extended for two years, based on performance.

Based on medical spending this year so far, the Plus ACO, which had 41,000 beneficiaries, would owe Medicare $6 million to $9 million by December. With a July 15 deadline to decide whether to drop out, Plus leaders decided the risk was too great to wait and see if savings would emerge later in the year as projected, Watson said.

During the first year, Plus did not save money but had a contract that protected the organization from any losses for the first year. That was one of five Pioneer contract options, which was selected by 16 ACOs.

Watson said Plus struggled to get timely claims data from the CMS to monitor quality and costs. Another difficulty, he said, was coordinating care for Medicare patients who sought care outside the ACO's network, a complaint made by other ACOs as well.

Medicare beneficiaries participating in both the Pioneer and Shared Savings Program ACOs are allowed to seek care from other hospitals or doctors, but the ACOs still are measured on patients' total costs and the overall quality of their care.

Unlike six of the Pioneers that did not earn savings payouts and are exiting the Pioneer program, the sponsors of Plus will not enter Medicare's alternative ACO effort, the Shared Savings Program. The University of Michigan Health System, which did achieve savings, is moving over.

Similarly, Presbyterian Healthcare Services is dropping out entirely from Medicare accountable care. It struggled to earn savings under its Pioneer ACO, which had 15,000 beneficiaries, because local healthcare utilization already was low, making further reductions difficult, said Todd Sandman, Presbyterian's vice president of strategy and customer engagement.

In addition, he said, Pioneer savings are calculated in part by a formula that includes the growth rate for a national sample of Medicare patients. Spending for that national sample slowed this year, making savings even more difficult to earn, Sandman said.

With those challenges, “we were not willing to assume that financial risk,” Sandman said.

But five of the Pioneer ACOs that incurred a loss decided to stick with Pioneer. Atrius Health is one Pioneer ACO sponsor that will continue in the initiative despite facing the prospect of paying Medicare back $2 million.

Dr. Gene Lindsey, Atrius' president and CEO, said he believes the financial hit from the first year of the program will be temporary. During the next few years, he said, Atrius' efforts to improve quality and lower cost will deliver Medicare shared savings that offset the first-year loss as well as covering the costs of launching the ACO program.

“Our objectives were not to do well in a particular financial cycle,” Lindsey said. “We believe the payoff is going to be the accumulated clinical transformation.”

Follow Melanie Evans on Twitter: @MHmevans

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