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Providers net uneven results from ACO experiment

(Story updated at 4:40 p.m. ET)

The first results for Medicare's biggest accountable care experiment under the Patient Protection and Affordable Care Act underscore the uneven progress so far by hospitals and doctors trying to curb healthcare costs by coordinating treatment and reducing unnecessary care.

Slightly more than half of the 114 organizations to join one of two Medicare accountable care efforts in 2012 did not reduce health spending below targets during their first 12 months trying to do so, newly released CMS data show.

Of the remaining organizations, 29 reduced spending enough to keep some of what they saved during the first 12 months. The rest slowed health spending, but marginally.

Accountable care awards hospitals and doctors a share of money they save only when providers achieve quality and health spending targets. The healthcare reform law called for Medicare to test the largely untried payment model as one of a few policies that seek to reform healthcare financing and, potentially, slow health spending growth.

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The inconsistent preliminary results are similar to the mixed performances in Medicare's smaller test of accountable care. The CMS Innovation Center's Pioneer ACO model, also launched in 2012, saw nine of 32 organizations exit the program after its first year. Nine of the remaining 23 organizations saved money, according to an independent audit.

Medicare officials say they are not rattled by the numbers.

Jonathan Blum, principal deputy administrator for the CMS, praised the performance so far, which he said has increased officials' confidence in accountable care's ability to lower Medicare spending and improve the quality of care. The first year was largely expected to be one that required investment and reorganization among ACOs to save money in later years, he said. “We have built the ACO program for long-term savings.”

Medicare will keep $128 million from the first year of the shared-savings program, according to the preliminary data (the CMS plans to publish final results this year). Successful ACOs will share another $126 million.

But industry experts wonder what hindered so many ACOs from getting better results.

“It's good news that there's savings. Period,” said Dr. Kavita Patel, managing director of the Brookings Institution's Engleberg Center for Healthcare Reform. But perhaps more important is how and why ACOs did not save money. “We can learn more from what's happening in the remainder of the organizations.”

Hackensack (N.J.) Alliance ACO was among the winners. The organization expects to receive a bonus payment of $10 million to $15 million based on its performance in the first 12 months. “I am surprised because I would have expected there to be similar savings that we obtained,” said Dr. Morey Menacker, its president and CEO.

Newly hired nurse navigators under the accountable care effort were critical to reducing hospital stays, readmissions and emergency room visits that helped to produce the savings he said.

Coastal Carolina Health Care, meanwhile, did not reduce spending enough during its first year in the program to keep some of the savings. Stephen Nuckolls, Coastal Carolina's CEO, said that might be attributed to how the CMS calculates savings, which is measured against a national benchmark despite regional variation in how quickly healthcare costs accelerate. The system received an advance of $2.5 million from the CMS to launch the ACO and hopes to be able to pay it back with savings.

Participants in the program must meet quality performance targets to share in any savings they produce. ACOs were required to report quality data the first year, but did not have to meet quality performance targets.

Five ACOs failed to report quality data. Two of them won't get bonus payments as a result, even though they otherwise qualified to share in the savings they achieved.

Four of the 114 ACOs agreed to assume downside risk—meaning they have to return money to Medicare if they exceed spending targets—in return for a larger share of savings. Two of them did not slow spending and may owe the CMS.

Despite the mixed results, the effort has since expanded to more than 340 accountable care organizations, including 123 that entered the program this month.

Also Thursday, the CMS announced that 232 acute-care hospitals, skilled-nursing homes, physician group practices, long-term care hospitals and home health agencies have entered into agreements with the Innovation Center's Bundled Payments for Care Improvement initiative.

The program is composed of four models of payment and episodic-care structures that link payments for a variety of services that Medicare beneficiaries receive during an entire episode of care.

Follow Melanie Evans on Twitter: @MHmevans
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