ACOs are a success for Medicare, but not for many providers

The Dartmouth-Hitchcock accountable care organization (ACO) was a substantial money-saver for the Medicare program, but it turned out to bleed red ink for one of New England's most prominent hospital systems.

That is a dilemma that ACO operators and the Centers for Medicare & Medicaid Services (CMS) will likely have to work out in the coming years, according to a recent blog post in the journal Health Affairs.

The system's Pioneer ACO was a fiscal success for CMS but mostly a money loser for Dartmouth-Hitchcock, according to the blog post authors--all executives and physicians with Dartmouth-Hitchcock, which is headquartered in Lebanon, New Hampshire. 

The system received a shared savings incentive payment of $1 million in the first year of the ACO's operations, but received financial penalties of $1.4 million in year two and $3.6 million in year three.

The penalties were incurred despite the fact that Dartmouth-Hitchcock's patients had the sixth-lowest per capita cost of the 19 Pioneer ACOs that remained with the program.

Dartmouth-Hitchcock "reduced annual per-capita expenditures by 3.9 percent, generating a cost savings of about $16.0 million while maintaining high-quality care," but "care costs were higher than the target set by CMS, hence the penalty," according to the authors.

The article faulted in part CMS' methodology for target-setting, which focused more on higher utilizers of healthcare services but were impractical for relatively low users, such as Dartmouth-Hitchcock.

That is not an uncommon story for providers that are operating ACOs. Despite the programs saving Medicare some $411 million last year, fewer than 100 of the more than 350 participating providers received a bonus payment. 

Dartmouth Hitchcock pulled out of its ACO just last month, citing its inability to make a financial go of the arrangement. That has led some experts to fear that the current model for ACO payment arrangements may be unsustainable.

To learn more:
- read the Health Affairs blog post