Last week, the Centers for Medicare and Medicaid Services released results for its two national ACO programs. In the area of quality, the results are impressive: In both the Pioneer and Medicare Shared Savings programs, almost all providers improved their quality measures across the board. They are more frequently screening for fall risk and tobacco use and cessation; patient experience was rated higher and the providers were more effective at screening for and controlling chronic conditions like high blood pressure.
Providers in these two programs are undoubtedly providing better care, but whether or not they are getting paid sufficiently for it is another question.
Is it worth it?
According to a report by the CMS, providers generated more than $372 million in savings for Medicare and qualified for shared savings payments of $445 million. But when the numbers are dissected, it shows that only half of the ACOs in the two programs saw any return on their investment.
This was the second year of the Pioneer ACO program and only 11 of the 23 participants earned shared savings. Three of the groups had losses and three "deferred reconciliation" until the end of year three. The Medicare Shared Savings ACO saw 53 participants earn performance payments; 52 reduce costs but not enough to see any reimbursement; and one participant that ended up owing $4 million to the program because of losses.
After the first year of the Pioneer program, nine providers dropped out and many cited financial concerns for the departure. In an article in the Washington Post, Affordable Care Act expert Sarah Kliff interviewed a number of ACOs to find out why they were dropping out of the Pioneer program.
Kliff said that, in general, hospitals like the idea of value-based care, but they don’t necessarily think the Pioneer program is the way to get there. Some are sliding over to the Shared Savings program, which has less risk than the Pioneer program.
What she found was that organizations like Austin's Seton Health Alliance invested millions into the programs by hiring nurse coordinators to improve care coordination and installing data systems to ease doctor interaction. Then they quit.
This initial investment is part of the problem for hospitals. An article in the New England Journal of Medicine from 2011 compared the Shared Savings program with another that preceded it. The report's authors estimated that an ACO making an investment of about $1.7 million would require a 20% return on investment during the three-year program to make money from the initiative.
What are the challenges to providers?
The study authors said the time frame to make a reasonable return on what most providers need to invest to take part in the program is likely more than five years. Even large, integrated practices would have a hard time getting their investment back in five years. In order to keep ACOs viable, policymakers would need to address their payment models, they said.
The point of ACOs is to reduce costs, which often comes in the form of fewer hospital visits and tests performed. This leaves providers essentially creating a financial loss in the hopes that they will make enough in reimbursements to recover that loss in revenue. ACOs can also be a challenge financially because the payment of any shared savings happens at a future date, creating a potential cash flow problem for some providers.
Finally, even hospitals that see a large shared savings check in the first couple of years of participation in an ACO likely see those returns diminish over time. Eventually, there is only so much chaff that can be cut to keep reducing costs and then providers may hit a wall. This was seen by Atritus Health, a physician group in Massachusetts that owed Medicare $2 million because of high spending on their Medicare beneficiaries.
Gene Lindsey, president and CEO for Atritus, told the Advisory Board Company that the organization (which will be staying in the ACO) faced challenges not only because of Medicare's low budget, but also because they had already begun using a lot of practices that had reduced costs. There simply weren't a lot of savings left to be had.
Want to read more? You may enjoy this story on 4 facts to consider before filing for the Medicare Shared Savings Program.