Not long ago, San Diego's Sharp HealthCare made a stir when it announced that it was dropping out of CMS's Pioneer ACO program. But if you look closely at the situation, it's more surprising that 22 ACOs still remain in the Pioneer program. Let me explain.
Two years ago Sharp, along with two of its affiliated medical groups, Sharp Community Medical Group and Sharp Rees-Stealy Medical Group, formed Sharp ACO to participate in the CMS Pioneer ACO program. The idea was that Sharp ACO would get shared savings payments from CMS if it achieved their cost savings and offered quality, coordinated patient care for the assigned group of beneficiaries. Sound good? Well, the downside of this is that Sharp ACO—like its peers in the Pioneer ACO program—was on the hook to actually pay CMS if the price of care went up.
For 2012 and 2013, Sharp ACO's performance was under a defined 2% and 1.9% minimum threshold, so it made no money but also didn't have to pay out to CMS. But this year, said Sharp in its third-quarter financial report, health leaders determined that they were at risk for significant shared loss, even though they had cut readmission rates. Execs said that one of the main reasons the program wasn't working for Sharp was that CMS was setting standards on a national level rather than adapting to the markets in which it operated.
Wishful thinking
While CMS has designed the Pioneer ACO model to help move providers quickly from a shared savings payment model to population-based payment in care, getting there seems to be wishful thinking. Including Sharp, 10 organizations have dropped out of the Pioneer model, and it's hard to imagine that more won't exit given the pressures Sharp has described.
"What's driving all these health systems nuts is [that] CMS' own methodology [is] causing them to lose under this demonstration," said John Gorman, founder of healthcare consulting firm Gorman Health Group. "It's not their lack of performance." Gorman expects more ACOs will drop out of the program if CMS doesn't address the disparity between paymench benchmarks and regional factors.
Those providers that do hang in with the Pioneer ACO program and move to a population-based model may find it easier to work with CMS than the pioneers of the Pioneer program. After all, CMS promises that the population-based payment models will be "flexible to accommodate specific organizational market conditions in which Pioneer ACOs work," which might have been just the ticket for Sharp.
Still, to date when you hear news of an ACO is that make money for providers, it's generally in partnership with health insurance providers, such as the recent announcement that Aetna and Banner Health's joint ACO generated $5 million in savings on 300,000 lives and created a 5% drop in average medical cost for members.
I'm not suggesting that there is no model in which government and ACOs can partner to their mutual benefit. But I do think that the current model is severely flawed and needs a rehaul if CMS is to get providers is excited about its experiment.
Want to read more? You might enjoy this story about how one insurer exposed Medicare ACOs' biggest flaw or this story about 4 facts to consider before filing for the Medicare Shared Savings Program.