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

Only 97 Pioneer and MSSP accountable care organizations qualified for shared savings payments

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.