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Medicare's Pioneer program down to 19 ACOs after three more exit

(Story updated at 7:30 p.m. ET.)

Three years after the CMS carefully selected 32 accountable care organizations deemed best able to manage the Pioneer program's financial risks, three more have decided they no longer want to. The new departures—the program is now down to 19 ACOs—suggest even the most sophisticated health systems may be unwilling to take losses as policymakers test new payment and delivery models.

Franciscan Alliance in Indianapolis, Genesys PHO in Flint, Mich., and Renaissance Health Network in Wayne, Pa., have exited the program, which is now in its third year.

The ongoing trickle of departures from the Pioneer program underscores the broader tension and debate among providers, policymakers and health systems exploring ways to overhaul the way Medicare pays hospitals and doctors—attempts that have rippled through private markets as commercial health plans follow suit.

In August, Sharp HealthCare, San Diego, announced its decision to pull out after determining “the model was financially detrimental” despite the ACO's performance managing quality and healthcare use.


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The Pioneer program was Medicare's first test of accountable care under the Patient Protection and Affordable Care Act, designed and administered by the CMS Innovation Center. It launched in 2012 with 32 organizations willing to accept potential losses with the goal of earning bonuses tied to performance on quality measures and their ability to slow health spending.

The loss of participants has raised concerns for the CMS Innovation Center, according to an article published in the Journal of the American Medical Association by the agency's director, Dr. Patrick Conway, and other officials. But they also said the program is “on an upward trajectory” and is yielding valuable lessons toward ACO development and the potential for national expansion.

Conway and his colleagues noted that the organizations that left during the first year did not abandon accountable care and that providers “must make decisions most appropriate for their particular market and strategic circumstances.”

Some executives, though, have criticized Medicare's formulas for rewarding ACOs as skewed in favor of ones that operate in markets that have above-average health spending, where hospitals and doctors have more opportunities for savings, said Eric Hammelman, vice president for Avalere Health. That raises questions about Medicare's ability to recruit or retain ACOs in markets where there isn't as much opportunity. And as ACOs grow more efficient and Medicare adjusts savings targets accordingly, it may also grow increasingly difficult for ACOs everywhere to earn savings.

Nine participants dropped out after the first year—seven of them switched to the Medicare's larger and less risky accountable care initiative, the Shared Savings Program.

Medicare's ACO programs so far have produced inconsistent results, some of which policy experts and ACO executives have blamed on how Medicare calculates how much ACOs potentially saved the program. Last week, the CMS announced that the initiatives saved Medicare $817 million through 2013. Dozens of participants shared $445 million of that amount, but three-quarters of ACOs saw nothing after failing to do sufficiently well against the financial benchmarks.

Eleven Pioneer ACOs earned bonuses in the program's second year, with savings that ranged from $1.2 million to $13 million, the JAMA article said. Six generated losses and will be required to repay Medicare. The mean score on measures of quality increased to 84% from 73% among the 23 ACOs in year two.

Genesys PHO will repay Medicare $1.9 million because the ACO failed to hold down spending during the second year, according to the organization's CEO, Michael James.

James said the Flint, Mich.-based ACO was at a disadvantage because the Pioneer model failed to adequately adjust for the severity of patients' poor health. The formula also discounts the role that socio-economic factors play in health, which he described as significant for the patient population in Flint.

Genesys PHO will now apply to the shared-savings model to maintain access to patient data that the CMS furnishes to ACOs and Genesys found useful in identifying gaps in care. “We still believe that our seniors are working through a disorderly healthcare system that does not improve the quality of their health or the quality of life,” James said.

Franciscan Alliance likewise plans to join the Medicare Shared Savings Program, said Jennifer Westfall, Franciscan's regional vice president for Franciscan Alliance Accountable Care Organization. The ACO did not get to share any savings in the Pioneer program's second year and anticipates no bonus in the third year, which prompted the organization to leave.

“Results from 2013, our second performance year (PY2) in the Pioneer ACO, are now available from CMS,” she said. “Overall, our Pioneer ACO received a quality score rating of 83.7%. While this is indicative of strong performance, we did not do as well in meeting our benchmark for reducing the costs of patient care.”

Renaissance Health Network could not be reached immediately for comment.

Follow Melanie Evans on Twitter: @MHmevans


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