- San Diego-based Sharp HealthCare, which operates five hospitals, announced in its Q3 earnings report that it has dropped out of the Medicare Pioneer accountable care organization program. Sharp is the tenth ACO to ditch the program, leaving 22 remaining (although some have transferred to the less-risky shared savings program).
- According to Sharp, fundamental flaws in the program itself prompted the system's departure: "Because the Pioneer financial model is based on national financial trend factors that are not adjusted for specific conditions that an ACO is facing in a particular region (e.g., San Diego), the model was financially detrimental to Sharp ACO despite favorable underlying utilization and quality performance," Sharp said in its disclosure.
- Sharp's ACO covered 28,000 Medicare beneficiaries, who will be transferred to other care management organizations.
That the payment model for the Pioneer program is too "one-size-fits-all" is not a new criticism. CMS uses national measures to set payment rates that do not take into account regional factors like area wage index. According to Alison Fleury, CEO of Sharp's ACO, San Diego's area wage index rose 8.2% from 2012 to 2014, but payments from the program did not account for that hike.
Fleury also said that because of the way the program calculates Medicare disproportionate-share hospital payments, the system was negatively impacted by the larger proportion of Medicaid patients it treated as a result of the California expansion.
Of course, that doesn't mean that no Medicare ACOs have been successful. Of the 32 Pioneer ACOs, nine significantly reduced spending growth in 2012, generating $147 million in total savings while still maintaining high-quality care, according to California Healthline.
The secret to success, however, might be dependent on the healthcare market in which an ACO is launched, not the model itself—if, in fact, Sharp is right to blame a disparity between payment benchmarks and regional factors.
And if CMS doesn't adjust its payment methodology to reflect provider concerns? More ACOs will likely drop out of the program, says John Gorman, founder of healthcare consulting firm Gorman Health Group.
"What's driving all these health systems nuts is [that] CMS' own methodology [is] causing them to lose under this demonstration," Gorman said. "It's not their lack of performance."
Want to read more? You might enjoy this story about how one insurer exposed Medicare ACOs' biggest flaw.