Healthcare Business News

Reform Update: ACO executives say experience rocky, but informative

By Melanie Evans
Posted: January 8, 2014 - 4:30 pm ET

Medicare started 2014 by once again expanding the number of accountable care organizations in its shared-savings program. Nearly a year and a half in, meanwhile, some executives of ACOs in the program's first wave say their experience has been rocky but also highly informative.

New insights from CMS data newly available to hospitals and doctors, the leaders said, has helped providers to coordinate and improve care—and hopefully reduce costs and save Medicare money.

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“All we've been doing is learning,” said Dr. David Shulkin, who oversees the Atlantic Accountable Care Organization in Morristown, N.J. That was expected, he said, and one reason for early entry into Medicare's accountable care experiment. “We knew it was going to be a steep learning curve for us. We've actually learned more than we've accomplished.”

Performance for the 27 inaugural ACOs in Medicare's shared-savings program are not yet available from the CMS. (Results are expected soon, a CMS spokesman said.)

There are now more than 340 ACOs in the Medicare shared-savings program, which gives hospitals and doctors three years to adopt new strategies that seek to hold down costs and improve quality in return for a share of the money Medicare saves from those efforts.

Success, however, is not at all certain. Public reporting on the performance of Medicare accountable care and similar agreements between commercial insurance companies and health systems has been limited.

Organizations in Medicare's alternative test of accountable care, known as the Pioneer ACO model, ended the first year in January 2013 with mixed results and shaken confidence, at least among about one-third that exited the initiative. Most who left the Pioneers (seven out of nine) switched to the shared-savings program, which has less risky financial incentives. The remaining two exited the Pioneer program entirely.

Dr. Tom Kloos, president of the Optimus Healthcare Partners ACO, said the performance on savings “looks to be in the direction we want.” He cautioned, though, that the data is preliminary. “We don't fully trust the numbers,” and are awaiting final results, he said.

What is clear, he said, is a change in practice among physicians who now more aggressively check in with patients between visits or follow up on overdue appointments or preventive screening. The Optimus ACO has seen emergency room visits decline and patients have been to the hospital less often, he said.

The Atlantic ACO confronted more than one surprise during the first 21 months of operation. The cost to start an ACO was “not a small number,” said Shulkin, thanks to investment in information technology and new hires, in part to collect quality data needed to earn performance bonuses.

New data from the CMS on patients' medical care and costs yielded another surprise: The cost of care for patients after they leave the hospital—in nursing homes, for example—was about 40% greater than believed. Hospitals are costly, but limiting intervention to reduce spending to the hospital is not enough, the data show. Now the ACO is analyzing the data to identify how patients can receive the most cost-effective care during—and after—a hospital stay.

The lag in performance results also means ACOs must grapple with a parallel lag in financial incentive payouts. Shulkin said the Atlantic ACO decided early to grant performance payments to physicians in advance to keep the incentives more immediate and motivating. “It's very hard when the check's always in the mail,” he said. ACOs must ask doctors to “do all this work and maybe possibly someday you might receive some shared savings 18 months to 20 months down the road.”

The Hackensack Alliance ACO also made investments in technology and new staff, and preliminary results suggest the ACO saved Medicare $10 million during the first performance period, said Dr. Morey Menacker, the organization's president. Still, recouping those expenses will depend on confirmation of that figure, and Medicare shared-savings bonuses likely won't come until this spring. “This was based on a lot of faith,” he said.

Included in that cost were consultants hired to promote adoption of patient-centered medical home criteria for physicians in the ACO. The Hackensack Alliance also chose to start small and expand. “We started with the philosophy that it was very difficult to change physician practice patterns,” Menacker said. Based on preliminary results, he added: “Our philosophy was sound.”

CMS actuaries downplay reform's role in low spending growth

Data released by the CMS this week showed that the historically slow rate of growth in health spending, which started after the 2008 financial crisis, continued in 2012. The sluggish growth has raised questions about the degree to which health reform has contributed to the slowdown.

The agency's actuaries, though, rejected reform as a primary contributor and instead credited the economy.

The U.S. spent about $2.79 trillion that year on all things healthcare: treatment, research, health insurance, equipment and construction, an increase of 3.7% from the $2.69 trillion the prior year (rounding skews the figures somewhat). That is in line with 3.6% in 2011 and 3.8% in each of the two previous years.

Follow Melanie Evans on Twitter: @MHmevans

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