ACOs are worth the risk

Put me in the glass third-full camp.

The first-year results from Medicare's Pioneer accountable care organization pilot project showed all 32 of the provider participants met their quality improvement-reporting goals, but only 13 reduced costs—the ultimate goal of the program. The 669,000 beneficiaries in those 32 groups had aggregate healthcare costs that grew by only 0.3% compared to 0.8% for a comparable group of beneficiaries not in ACOs, according to the CMS.

Let's put those numbers in a broader context. That 0.8% is well below the 6.2% growth in Medicare spending in 2011 that the CMS actuaries reported in January. Even discounting for the growth in the overall Medicare population, healthcare spending on the elderly appears to be slowing sharply, as it has for the broader population. The success bar for ACOs just got a lot higher.

That's good news for the CMS, for taxpayers and for elderly patients. The question that ACOs ultimately have to answer, though, is whether that can also be good news for providers as they adapt to risk-based reimbursement models.

The pilot project's first-year results suggest it can. The providers in the ACO pilot project as a group knocked another half percentage point off growth. The architects of healthcare reform and supporters of moving providers to risk-based reimbursement have every reason to be pleased given that all of those savings were concentrated in just over one-third of the providers in the program. It suggests that the upside potential of ACOs is huge.

These 13 groups proved that improving quality in ways that reduce utilization—fewer useless procedures and tests, a drop in readmissions, more spending on coordinating care through primary-care providers—lowers healthcare spending. The results also suggest the shared savings were enough to keep these “winner” hospital systems and physician practices solvent through the process.

Is this replicable by the other participants in the Pioneer program? More importantly, is it replicable by the nearly 400 hospital systems and physician group practices across the country that have formed private-market ACOs, not to mention the thousands more that have only begun to contemplate risk-based reimbursement?

Admittedly, Pioneer participants are among the more sophisticated provider organizations in the country, as Modern Healthcare reporters Melanie Evans and Jessica Zigmond write in this week's cover story. Groups such as Boston-based Beth Israel Deaconess Care Organization, which delivered care for its 30,000 Medicare beneficiaries at 4.2% below budget, deployed a sophisticated set of strategies to achieve its $15 million in shared savings, which it divided with the CMS.

It successfully deployed a strategy of targeting the most at-risk patients for specialized services such as home visits by nurse practitioners. It organized its physicians into groups and provided specialized instructions on care management—focusing specifically on how to manage patients on fixed payments.

Even groups such as Atrius Health, an eastern Massachusetts physician group alliance, remain committed to the program although they may have to pay the CMS an additional $2 million. Their actual costs exceeded the benchmark, no doubt driven by the costs of implementing coordinated care. Their CEO still believes there will be a long-term payoff from the program as clinical-care deliverers within its network adapt to the new model.

Still, nine ACOs dropped out of the program, two entirely and seven opting for a less risky shared-savings program. That's too bad. Experience remains life's most important teacher—a truth as applicable to organizations as it is to individuals.

The initial experiences of the Pioneer ACOs show that there is a path to higher-quality, lower-cost care—one that is financially sustainable for provider organizations. The lesson others should take from their experience is that they will get there only if they stay on that path.

Follow Merrill Goozner on Twitter: @MHgoozner