Pioneer Accountable Care Organizations Report Mixed Results

By Matthew J. Effken. The federal government is touting a recently published study by L&M Policy Research that concludes the 32 “Pioneer” Accountable Care Organizations saved taxpayers $384 million in Medicare expenditures during the years 2012 and 2013. The savings average out to approximately $300 per participating beneficiary per year compared to other Medicare fee-for-service participants.

Accountable care organizations are made up of doctors, hospitals, and other healthcare providers that work together to provide coordinated care to Medicare fee-for-service beneficiaries. To the extent an ACO’s efforts reduce Medicare spending based on certain benchmarks, they split the savings with the government. Pioneer ACOs also agree to share losses, by refunding a portion of excess spending to Medicare.

Health and Human Services Secretary Sylvia Matthews Burwell highlighted the results in a recent speech to the American Hospital Association. The Secretary linked the ACO results to the agency’s goal to have 85 percent of Medicare fee-for-service payments to be tied to value by 2016 and 90 percent by 2018.

Not all indications in the report are positive, however. The amount of annual savings in the second year of the program was less than half of that in the first year, indicating that returns may diminish over time. Also, some Pioneer ACOs experienced losses and a significant portion merely broke even. In an alternative report, the Center for American Progress concluded that net federal savings were only 0.23 percent of the benchmark in year one and 0.67 of the benchmark in year two. Of the 32 original participants in Pioneer ACO model, only 19 currently remain in the program. However, some have opted to participate in other ACO programs, such as the Medicare Shared Savings Program, where the organizations are not subject to downside risk.

The L&M study is available at: Additional references for this article may be found at and

© 2015 Houghton Vandenack Williams

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New Rules Increase Incentives to Join an ACO

Physicians can now participate in an accountable care organization (“ACO”) without facing financial penalties for failing to achieve savings targets.  This new rule is among several released by CMS designed to increase the incentives for hospitals and physicians to join an ACO.  Other new rules include lowering the requirement of participants in an ACO to use electronic health records and a reduction in the number of quality measures.

While ACOs are designed to reward health care providers for providing quality care at cost-efficient rates, many providers were reluctant to embrace the system because of worries about the risks of penalties.  CMS hopes these new incentives will reduce such fears and encourage physicians and other health care providers to pursue ACO participation.

© 2012 Parsonage Vandenack Williams LLC

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New Program Changes the Way Medicare Reimburses Health Care Providers

A pilot program called the Bundled Payments for Care Improvement Initiative (the “Bundling Initiative”) has recently been unveiled by The Department of Health and Human Services (the “Department”).  The program is designed to change the way Medicare reimburses health care providers. 

Under the current method, Medicare makes separate payments to each provider. In an effort to encourage better coordinated care and decreased costs, the Bundling Initiative calls for Medicare to pay one lump sum to the hospital for an “episode”, such as a hip replacement or heart bypass surgery, and the hospital would then distribute the payment to participating providers.  The concept is that if Medicare pays only one large payment, the individual providers will communicate with each other to promote efficient and high quality care.  Obviously, the Department is ignoring the possibilities of abuse by some providers, especially the recipient provider.

The Bundling Initiative is seeking applications for four defined models of care.  Three of the models involve retrospective bundled payments, and one model would pay providers prospectively.  Interested providers must submit a nonbinding letter of intent to the Department by September 22, 2011 for Model 1 and November 4, 2011 for Models 2-4. 

© 2011 Parsonage Vandenack Williams LLC

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