Universal American retreats on Medicare ACOs

Universal American, a publicly traded insurer that operates 34 Medicare accountable care organizations, announced it will no longer finance ACOs it sees as having little hope of a financial return.

Universal contracts with local physicians across 13 states to operate its Shared Savings ACOs, nearly 10% of the ACOs in that program. “We just want to stop the bleeding,” said Robert Waegelein, Universal's president.

Universal invested $63 million through last December in Medicare ACOs. The company's first-quarter ACO investment of $13.1 million was a drag on its earnings, analysts said.

The decision highlights the financial risks and operational challenges for even well-capitalized ventures pursuing accountable care. Startup costs can be significant and many doctors and hospitals find the financial incentives too weak to justify major practice changes.

“We're not giving up on the program,” Waegelein said. Universal American will continue to invest in successful ACOs. Providers that understand what it takes to operate a successful ACO “are going to get our continued support,” he said.

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