The Universal American ACOs showed uneven ability to manage medical costs, which is one requirement to receive financial bonuses under accountable care. Of the 27 ACOs that failed to reduce spending enough to earn a bonus, eight saw spending accelerate beyond a benchmark set by Medicare.
The company's CEO said the results—the first for Medicare accountable care, which launched in 2012—will help determine where Universal American will continue in the initiative. “These results have helped us decide how to reduce the size and scope of our investment,” Richard Barasch, Universal American's chairman and CEO, told analysts as he announced the company's third-quarter results.
“Highly motivated physicians, who are led by other highly motivated physicians” are critical to ACOs' success, Barasch told analysts. “Without doubt, by far, engaged physicians is the number one criteria.”
But another factor, the degree of hospital competition in markets, also matters. “It creates problems for the physicians when there's only one hospital to choose from,” he said. “We've been successful in places where there's a little bit of hospital competition.”
Third-quarter results for its ACOs netted the company its first quarterly profit on ACOs, said Robert Waegelein, Universal American's president and chief financial officer. The company's ACO expense in the third quarter was $10 million and its profits before taxes were roughly $3 million after the company received $13 million of its ACOs performance bonus.
Universal American will continue to operate ACOs and also may seek to expand into Medicare Advantage or other agreements with physicians in its ACOs, Barasch said. “Two years into the Medicare Shared Savings ACO Program, we remain firmly committed to this business, and are seeing encouraging data that demonstrates that we were improving quality and positively impacting medical costs through reduced hospitalizations, reduced readmit rates, and reduced ER visits,” he said.
The company's significant role in the early launch of Medicare accountable care, its subsequent decision to scale back its investment and mixed results for its ACOs highlight the uncertainty across healthcare as the industry and public policymakers test ways to make fundamental changes in how U.S. healthcare is financed.
Accountable care under Medicare is one test of new financing under the healthcare reform law, one that seeks to use new incentives for hospitals and doctors to more closely manage medical costs and quality.
Medicare continues to expand the program, which includes more than 300 ACOs, though early experience has proven rocky. Quality performance varies widely, as do financial results, with limited transparency in public reporting of either. The CMS released performance results for ACOs for the first time this month.
Follow Melanie Evans on Twitter: @MHmevans