Medicare ACOs saved $411M in 2014, but few earned bonuses

Medicare accountable care organizations generated $411 million in total savings in 2014, but few of the Pioneer and Medicare Shared Savings Program (MSSP) ACOs qualified for bonuses in the second year of the program, according to the latest data from the Centers for Medicare & Medicaid Services (CMS).

Only 97 of the 20 Pioneer ACOs and 333 MSSP ACOs qualified for shared savings payments of more than $422 million by meeting quality standards and their savings threshold. The results indicate that ACOs with more experience in the program tend to perform better over time, according to a CMS fact sheet.

The financial results came as a disappointment but were not a surprise to the National Association of ACOs (NAACOS). The total dollar savings increased due to the fact that more than 100 additional ACOs joined the program, but the data show that the average savings per ACO actually declined significantly, said Clif Gaus, chief executive officer of NAACOS, in a statement.

"This is probably due to the unfair quality penalty, which is so stringent that unless an ACO scores perfectly on every quality measure, their savings will be reduced," he said. "We expect ACOs to deliver better care for Medicare beneficiaries, but the quality benchmarks that CMS prescribes are the government example of letting the perfect be the enemy of the good."

Gaus said the data indicates that 92 of the ACOs in 2014 received $341 million in savings compared to 52 ACOs that received $315 million in 2013. But hundreds of organizations with thousands of doctors, hospitals and other providers have invested more than $1.5 billion of their own money in ACOs to date and have received only $656 million total in return. However, CMS has earned $848 million in savings for a small investment, he said.

"This is not a sustainable business model for the long-term future," Gaus said. "With Medicare cost growth at record lows, now is the time for the government to invest in and support a national effort for population-based coordinated care and not just take, or be satisfied with, savings from a minority of ACOs at the risk of the majority of ACOs abandoning the program."

In fact, Gaus estimates that as many as 40 to 50 ACOs will leave the Medicare program this year unless the government takes steps to improve the program, including changing the formula for risk adjustment, setting the target benchmarks, eliminating the "penalty-only" quality scoring and providing financial rewards for improving quality.

But Richard Barasch, chairman and chief executive officer of Universal American, which runs Collaborative Health Systems that has 25 ACOs that participate in the MSSP program, disagrees. "In our universe, we had nine ACOs achieve shared savings and another eight that saved money for CMS but didn't share in the savings. But more importantly, we've seen shared improvement across the board in quality--and that's for all our ACOs including those that didn't get over the threshold line," he told FierceHealthcare in an exclusive interview.

Those achievements include a large number of doctors doing work that helps move away from fee-for-service to value-based payments. "It's hard work and doesn't happen overnight," Barasch said.

Although he agrees with Gaus that the federal program could use tweaking, he said it takes time for the government to get the model right. "I think it's really important to not just talk about the money but the improvements in quality. Every single one of our ACOs improved its quality. And being paid for quality as opposed to being rewarded for quality is coming in all aspects of healthcare system and providers," he said.

Emily Brower, vice president of population health for Atrius Health, the Northeast's largest nonprofit independent multi-specialty medical group and an original Pioneer ACO, agreed with Barasch's assessment. Atrius ranked as the highest on the CMS overall quality score among Pioneer ACOs in New England and the third highest nationally based on the 33 ACO quality measures.

In an interview this morning, she said that while Medicare ACOs face many challenges, she believes that the models are a success because they've pushed the industry as a whole to value-based payment models.

The problem that many ACOs face, she said, is the math formula under the MSSP, which calls for a higher threshold of earnings in order to achieve returned savings. Pioneer ACOs, on the other hand, can choose their threshold as low as 1 percent, so as long as they have savings of 1 percent, they receive shared saving bonuses.

In addition, where an ACO is located geographically can make a big difference in how it generates savings. The Medicare programs will compare an ACO's historical costs in its market to a benchmark that reflects national costs and trends. So Brower said it will create an extra hurdle if an ACO is in a market that is significantly different than the national average.

Finally, if  an organization has done a good job of managing population health for years, there is not as much opportunity to earn savings because the ACO has to perform against its own historical costs. "It does create additional challenges for ACOs," Brower said, and Medicare is quote, aware of this, and we've seen an evolution in ACOs including their proposed next generation ACO."

CMS' new ACO model will allow participants to take on greater financial risk with the potential to earn a greater reward due to the challenges ACOs have had to improve care and lower costs. The agency also recommended changes to the MSSP program to give ACOs an extra three years before they could face penalties for poor performance. But experts say that while the changes are a start, they don't do enough to save the ACO program.

But CMS said that the latest data show the Medicare ACOs continue to improve quality of care and generate financial savings. "These results show that accountable care organizations as a group are on the path towards transforming how care is provided," said CMS Acting Administrator Andy Slavitt in a statement. "Many of these ACOs are demonstrating that they can deliver a higher level of coordinated care that leads to healthier people and smarter spending."

ACOs are judged on the quality of care they provide, such as how well patients rate their doctors and how well clinicians communicate information to patients. Pioneer ACOs have showed improvement in 28 of 33 quality measures and MSSP ACOs have improved on 27 of 33 quality measures, according to CMS.

The most experienced ACOs are Pioneer ACOs, which are now in the third year of the program, and have generated $120 million in savings, representing a 24 percent increase from their performance in year two. But they also showed strong improvement compared to year two in medication reconciliation (70 percent to 84 percent), screening for clinical depression and follow-up plans (50 percent to 60 percent), and qualification for an electronic health record incentive payment (77 percent to 86 percent).

The data show that 92 MSSP ACOs earned $341 million as part of their share of program savings, compared to 58 ACOs in 2013 that earned performance payments of $315 million. However, 89 ACOs didn't qualify for the shared savings because they didn't meet the minimum savings threshold even though they did reduce healthcare costs compared to their benchmark.

To learn more:
- here is the CMS fact sheet
- read the CMS announcement
- here is the NAACOS statement

 
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