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Pioneer ACOs: Pass or Fail, the Model is Here to Stay

Love them or hate them, it’s that time of year when America is getting inundated with high-profile, big budget sequels. The Centers for Medicare and Medicaid Services (“CMS”) is getting in on the act with a follow-up and expansion to the controversial Medicare Pioneer Accountable Care Organization ("ACO") program that was launched in 2012. Following the recently released positive results for the program from 2012 to 2013, CMS is declaring the program a success. But then, why did over 40 percent of the Pioneer ACOs drop out of the program in the first place? And just how should healthcare providers react to this expansion news?

Launched in 2012, the Pioneer ACO Model was designed for healthcare organizations and providers who were already experienced in coordinating care for patients across care settings. Through the alignment of provider incentives to improve quality and health outcomes for patients across the ACO, the program aimed to transition more rapidly from a shared savings payment model to a population-based payment model. The Pioneer Model operated on a track that was consistent with the more popular Medicare Shared Savings Program ("MSSP"), but with greater downside risk and greater levels of shared savings for successful performance.

CMS only allowed organizations to participate that it believed to be the most experienced in care coordination and with the highest chance of success. This led to only 32 brave, inaugural ACOs, or “Pioneers,” as CMS’ first batch of participants. Since 2012, 13 of the 32 Pioneer ACOs have left the program, either exiting Medicare accountable care models completely or transitioning to the less lucrative but also “zero risk” MSSP (Track 1). The majority of ACOs who exited the Pioneer program reportedly found it too costly, too risky, or just simply too complex.

Nearly $400 Million in Pioneer ACO Savings 

However CMS recently announced that, in total, the 32 Pioneer ACOs combined for $384 million in savings over the two-year period, an average of $300 in savings per beneficiary annually. This reduction was achieved largely through a population exhibiting lower hospital utilization, incurring fewer tests and procedures, and undergoing more provider follow-ups after being discharged from a hospital. These positive results have expedited CMS’ stamp of approval for expansion to a larger population of beneficiaries.

What remains unclear is exactly how these ACOs achieved the results and how to establish a more sustainable model (the ACOs saved substantially more in 2012 than in 2013 - $280 million vs. $105 million). But what is clear is CMS’ intent with their latest exuberant declaration: ACOs and population-based payment models are here to stay.

The first wave of CMS’ commitment to promoting the shift in payment methodologies was with the proposed new Track 3 through its MSSP. CMS is currently inserting the design elements from the Pioneer ACO model into the proposed Track 3. Traditionally ACOs participating in the MSSP had two risk arrangement options: Track 1, which presented no downside risk but a lower shared savings rate; and Track 2, which offered a greater shared savings rate but came with the burden of shared losses as well. The proposed Track 3 offers a higher maximum shared savings rate in exchange for accepting greater downside risk. Track 3 proposes a shared savings rate up to 75 percent based on quality, 15 percent higher than in Track 2. However, under Track 3, the ACO’s proposed shared loss rate ranges from 40 to 75 percent based on quality.

Next Generation ACO Model

CMS also recently unveiled the Next Generation ACO model, which offers financial arrangements with higher levels of risk and reward than current Medicare initiatives. This model is an attempt to correct perceived shortcomings of the original Pioneer model with refined benchmarking methodology and improved benefit enhancement tools to help ACOs improve engagement with beneficiaries. With offerings including a selection of payment mechanisms to enable a graduation from fee-for-service reimbursements to capitation, the Next Generation ACO model is similarly targeted at seasoned care management organizations. Again, the message from CMS regarding Track 3 and the Next Generation ACO is clear – only the most experienced in care coordination need apply.

CMS is in the process of evaluating further expansion options based on the positive Pioneer results. So what can healthcare providers, hospitals, and health systems take away from these performance results and announcements in the meantime? By now it is unmistakable that CMS is committed to the shift towards population-based models using the current shared savings arrangements as a conduit. Healthcare providers and organizations need to develop a strategy on where and how they enter into the path to value-based payments. The question no longer is if, but when.

Not for the Faint of Heart

Only the most experienced organizations are prepared to try their hand at the lucrative (yet aggressive) Track 3 or the Next Generation ACO; as we saw with the early Pioneer entries, many of those will fail. But there are plenty of other entry points for organizations to dip their toes into the accountable care and value-based payment waters. The most closely aligned initiative of course is through Track 1 of the MSSP, which offers no downside risk to participants through the first three years of the program. Track 1 allows organizations to build the infrastructure necessary to coordinate care and manage a population with little financial risk. Organizations can simultaneously recruit, refine, and strengthen their clinically integrated networks without being on the hook to CMS financially should they endure growing pains and overspend their benchmark expenditure for the year.

CMS has set a target for 50 percent of Medicare payments to be shared savings or population health payment models by 2018. Organizations need to ask themselves if they are putting themselves in the optimal position to survive and thrive as the landscape shifts to these alternative payment models.

Will you have the infrastructure, care management protocols, and network to support the transformative shift to value-based care? Evaluate your market. Are there opportunities to collaborate? What are your competitors doing? Are payers approaching your market with value-based contracts? Now is the time to discuss and strategize how your organization will adapt to the evolving payer environment and whether participating in one of CMS’ Shared Savings Programs can act as the impetus for change to propel your organization to future success.

CMS has made it clear that ACOs and alternative payment models are here to stay. What’s becoming unclear is whether organizations that don’t successfully prepare themselves for that reality will be as well.

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