ACO Cost Reduction: First Year a Pipe Dream?

ACO Cost Reduction: First Year a Pipe Dream?
Perez

Guest post by Ken Perez, healthcare policy and IT consultant.

When he was leaving his post as the head of the Centers for Medicare and Medicaid Services, Dr. Donald M. Berwick famously said that 20 percent to 30 percent of healthcare spending is waste that yields no benefit to patients.

Given that large amount of waste, surely then, one would have thought that almost all of the original 32 Pioneer ACOs—many of which are generally considered the most sophisticated healthcare organizations in the nation—should have been able to shave a few percentage points off their costs during their first year in the program and therefore, meet or beat their expenditure benchmarks.

As we know from a July 16 press release from CMS, that was not what happened. While all of the Pioneer ACOs successfully reported the required quality measures, a majority—60 percent failed to produce shared savings, missing their cost-reduction (or more accurately, cost curve bending) targets. Moreover, two of the pioneers incurred sufficiently large losses requiring penalty payments to CMS.

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Unpacking the Pioneer ACO Program’s First Year Report Card

Unpacking the Pioneer ACO Program’s First Year Report Card
Perez

Guest post by Ken Perez, healthcare policy and IT consultant.

Don’t say we had no warning. In late February of this year, 30 of the 32 Pioneer ACOs sent a letter to CMS that expressed concern about the program’s quality benchmarks and requested reporting-based, as opposed to performance-based, payments for performance year 2013.

On July 16, CMS shared the results of the first year of the Pioneer ACO program, which were rather checkered. On the positive side, all 32 Pioneer ACOs successfully reported the required quality measures, and costs for the more than 669,000 Medicare beneficiaries in Pioneer ACOs grew by 0.3 percent in 2012 versus 0.8 percent for similar beneficiaries in the same year.

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