Electronic Health Reporter

Guest post by Ken Perez, vice president of healthcare policy, Omnicell.

The recent flurry of upsets in college football has caused pundits and fans of the sport to do a mid-season recalibration of their projections for their respective teams. Many of the pre-season favorites — selected just seven or eight weeks ago — are no longer in the running for the national championship, others are plugging along pretty much in line with expectations, and a number of “Cinderella” teams have emerged. All teams, no matter how well they have done thus far, will need to make adjustments in the second half of the season.

In like manner, with recent developments and disclosures about CMS’ Pioneer ACO Model, it’s time to do a kind of mid-season recalibration and speculate a bit about needed adjustments to the program.

In August and September, four hospital systems — Sharp HealthCare, a five-hospital system in San Diego, Calif.; Franciscan Alliance in central Indiana; Genesys PHO in Flint, Mich.; and Renaissance Health Network in Pennsylvania — dropped out of the Pioneer ACO Program. With those departures and nine that were previously announced, the number of Pioneers has dropped by 41 percent, from 32 original participants to 19. It should be noted, however, that the majority of the ACOs that have left the program have transferred to the less challenging Medicare Shared Savings Program (MSSP).

On August 6, CMS posted 879 pages of public comments received in response to the CMS Innovation Center’s December 2013 request for information that solicited input on the Pioneer ACO Model as well as new ACO models.

On October 8, CMS released detailed quality and financial data by ACO for the first two years of the Pioneer Program. With regard to quality performance, average quality scores for the Pioneers improved by 19 percent year-to-year, with improved performance on 28 of 33 measures (85 percent) between the first and second year.

Financially, in year one of the program, 13 of the Pioneers (41 percent) met or beat their expenditure benchmarks, qualifying for shared savings and garnering an average of $5.9 million, with the amounts received ranging widely. One Pioneer had to pay CMS a shared loss of $2.6 million, and the remaining 18 ACOs either did not earn shared savings or did not owe CMS money because of  losses.

With the departures of nine ACOs at the end of year one, the Pioneer Program had 23 participating organizations. Of these, three chose to defer reconciliation until the end of the third year of the program. The remaining 20 experienced a wide range of results, from gross savings of $24.6 million to gross losses of $6.3 million. A majority of the Pioneers (14 or 61 percent) were able to reduce spending in year two, with 11 of these qualifying for shared savings. These ACOs garnered an average of $6.6 million, again with the amounts received ranging widely. Overall, the Pioneer Program generated total program savings of $96 million in its second year, with $68 million of shared savings going to the ACOs.

What conclusions can be drawn from these results? Of the two performance areas—quality and cost reduction—the latter is clearly the more difficult nut to crack. Also, as advertised, the Pioneer Model is the more challenging Medicare ACO program, with both higher risk and higher reward. Thus, in some sense, the mixed results to date are not too surprising, though obviously CMS would like to have seen a larger majority of the Pioneers stay with the program and achieve shared savings.

Given the aforementioned RFI and public statements by CMS officials expressing the organization’s intent to increase the number of Medicare ACOs, it is clear that CMS will make some “mid-season adjustments” to the Pioneer Program, as well as the MSSP.

What kind of changes can we expect CMS to make? We know from the proposed rule for the 2015 Physician Fee Schedule, released on June 19, that CMS has proposed to increase from 33 to 37 the number of quality measures for the MSSP and the Pioneer Program. This fall we expect CMS to release a proposed rule on the MSSP that will impact the Pioneer program. While the changes presented in the proposed rule will impact various elements of the programs, the most important ones—based on financial results and the candid feedback of some of the departing Pioneers—will pertain to the financial terms for ACOs, i.e., whether the economic value proposition or risk-reward combination is sufficiently attractive to retain current Pioneers and attract new participants to the program.