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States’ surging role in healthcare-payment reform


Readers would do well to read this Hospitals and Health Networks article by Ian Morrison about the states’ expanding role  in healthcare reform. He focuses on the fact that more  and more states, with huge purchasing power, are consolidating their purchasing  activities and coordinating with private players.

“Increasingly, states including Washington and Arkansas are using this combined purchasing power to transform the healthcare marketplace and coordinate their payment reform efforts with private purchasers. Public purchasers (acting in concert with willing private purchasers) can have a powerful influence on healthcare transformation.”

He writes that the states will:

  • “Drive value-based purchasing across the community, starting with the state as ‘first mover.”’
  • “Improve health overall by building healthy communities and people through prevention and early mitigation of disease throughout the life course.
  • “Improve chronic illness care through better integration of care and social supports, particularly for individuals with physical and behavioral ‘co-morbidities.”’

Mr. Morrison cites Washington State’s Health Care Innovation Plan, which we at Cambridge Management Group are very familiar with because of our ongoing work in Oregon and Washington State.

In that plan, “foundational building blocks” include, he notes, “robust quality and price transparency, activated and engaged individuals and families, regionalized transformation efforts, accountable communities of health, leveraged state data capabilities, practice transformation support, and increased workforce capacity and flexibility.”



Other examples in his piece include:


  • “Arkansas has initiated multi-payer-based episodic payment initiatives and patient-centered medical home programs.
  • “Minnesota’s multi-payer payment and delivery system reform strategy primarily is tied to spreading an ACO concept (the Minnesota Accountable Health Model framework) among Medicare, Medicaid, commercial payers and self-funded populations in the state.
  • “Oregon’s recent multi-payer efforts center on spreading the coordinated care organization model {like ACOs} introduced into the state Medicaid program in 2012.
  • “Vermont is at the forefront of state efforts to reform its health insurance payment and delivery system, and continues to actively test value-based payment approaches with multiple public and private payers.”

Pharmacy services’ role in ACOs


A study on “The Role of Pharmacy Services in Accountable Care Organizations” concludes:

“The ability of the accountable care model to hold organizations accountable for pharmacy spending and medication management, particularly for patients with multiple chronic illnesses, is likely to be a key factor associated with achieving the triple aim of improving the experience of care, improving the health of populations, and reducing costs.30 The present findings provide important baseline information for assessing the innovative approaches to medication management and their progress over time. Further analysis, linking health outcomes measurement to ACO characteristics and capabilities, is needed to assess the performance of ACOs taking varied approaches to prescription drug management. Given the broad implications of prescription drug management on quality and cost, ACOs may choose to improve prescription drug management through additional strategies such as including clinical pharmacists on care teams, assigning ‘medication coaches’ to high medication utilizers, and using various in-home monitoring devices to track adherence”

How ACO ‘triple whammy’ undermines Triple Aim


This HealthAffairs posting describes how a “triple whammy” undermined the Triple Aim. It looks at the experience of Dartmouth-Hitchcock Health, the pre-eminent academic health system in northern New England, which recently decided to bail out of  being a Pioneer Medicare Accountable Care Organization.

The “Triple Whammy” discussed in the piece include:

A Flawed Risk-Adjustment Methodology

A Moving And Flawed Target

Identical Incentives Regardless Of Baseline Performance

The authors concluded:

“DH {Dartmouth-Hitchcock} did not make the decision to leave the Pioneer program lightly. A leader in the adoption and application of ACO principles, DH is committed to pursuing high-value population-based care through continuous quality improvement and a relentless focus on cutting waste from health care delivery by engaging providers and payers, waste that is perhaps more difficult to identify and reduce from within a very low-cost environment.”

“To meet its ambitious goals, CMS must provide fair incentives that are large enough to encourage more healthcare systems to enter new reimbursement models and attract and retain providers in both high- and low-cost settings; otherwise, unrestrained fee-for-service cost growth will continue and the full promise of “accountable care” will remain unrealized.

“CMS must rectify the flaws in the Pioneer model so that high-cost ACOs are rewarded for meaningful improvement, and low-cost ACOs—that have already benefited CMS and Medicare beneficiaries by applying ACO principals over the long term and whose ability to generate cost savings is likely to be modest—are rewarded and not punished while demonstrating improvement.”




Experts weigh in on Medicare ACOs’ successes and failures


By Kaiser Health News

One of the missions of the 2010 federal health law is to slow the soaring cost of health care. A key strategy for Medicare is encouraging doctors, hospitals and other health care providers to form Accountable Care Organizations (ACOs) to coordinate beneficiaries’ care and provide services more efficiently. Under this experimental program, if these organizations save the government money and meet quality standards, they can be entitled to a share of the savings. Participation is voluntary.

In August, Medicare officials released 2014 financial details showing that the so far the ACOs have not saved the government money. The 20 ACOs in the Pioneer program and the 333 in the shared savings program reported total savings of $411 million. But after paying bonuses, the ACOs recorded a net loss of $2.6 million to the Medicare trust fund, a fraction of the half a trillion dollars Medicare spends on the elderly and disabled each year.

To help put this development in perspective, Kaiser Health News posed this question to several ACO experts: Three years in, the ACO program has many success stories, but it’s not yet saving Medicare money. Is it working?

Here are their answers, edited for clarity and space.

Richard Barasch

Chairman and CEO of Universal American Corp, whose subsidiary, Collaborative Health Systems, operates 25 Medicare ACOs

The program started off slowly. Changing the behavior of doctors from fee-for-service to a value-based environment involves changing in some cases 30, 40 years of behavior and doesn’t happen overnight. It’s very, very hard work. The doctors who embrace it find it very challenging. Think about how it affects their entire practice.

For these things to work, it has to be not just a value-based conversation but it also has to be about how the practice is actually managed. For example, the program wants us to encourage Medicare beneficiaries to get annual wellness visits. Most doctors don’t think of their enterprise as a business with customers. They think of it as a practice with patients. And things like the marketing work to get people in for an annual wellness visit is something new to them. It’s not something that they would typically do. So the notion of once a year, calling their members and asking them to come in—not just sending a little three by five inch card – but proactively getting them into the practice turns out to be a new exercise for many. Nine of our ACOs earned $27 million in shared savings.

There’s another thing going on here too, and this is sort of interesting from the non-financial, behavioral viewpoint. The doctors want to do the right thing. We’re seeing a generational shift in how physicians view their practices—again with a little self-selection. They know that pay for performance is coming. Now they are being measured, and they want their scores high. They understand that the world is changing and there’s a little bit of self-selection in our group with doctors who want to change along with the system. And what we found remarkable in the 2014 reporting period, even the doctors who did not earn bonuses were quite happy with the quality scores that were generated around their practices.

They work hard to get their quality scores where they think they should be—and when they’re not, the doctors are very, very chagrined. Hospitalizations in 2014 decreased on average by 11 percent for beneficiaries with chronic obstructive pulmonary disease, for example, and by 8 percent for those with congestive heart failure.

They cared a lot about that, even though the money wasn’t there in this marketing period.


Robert Murray

President of Global Health Payment, a consulting firm that works on health reform initiatives, and former executive director of the Maryland Health Services Cost Review Commission

The recent results on ACO performance indicate that it hasn’t been successful. A lot of people have characterized the results as lackluster at best, and I think things are even worse than that. Medicare’s performance data ignores the fact that each of these ACOs made very substantial investments in infrastructure: new data systems, care management and care coordination systems that probably run anywhere between 1 and 2 percent of their target budget. If you apply that to the results of the ACOs, you would find that even a significant proportion of those meeting Medicare’s goals would be underwater financially.

The problems are largely based on design flaws. Because the formation of an ACO requires substantial levels of risk and large up-front infrastructure costs, they have been largely dominated by deep-pocketed health systems, hospital networks, large multi-specialty physician groups or other combinations of specialists and hospitals.  However, these providers are unlikely to make aggressive attempts to control costs because the hospital and specialists are still being reimbursed under traditional fee-for-service payment model. For hospitals, which have high levels of fixed costs, the way to cover costs and earn profits is to generate more volume. Their incentives run directly counter to the goals of the ACO program, which are to reduce costs, to reduce unnecessary use of hospitals and high-priced professionals. The ACO model for these groups is akin to asking an overweight patient to eat his or her own flesh to become thinner.

CMS could correct these deficiencies by developing a new ACO model that features groups of primary care physicians (PCPs) as the key organizational building blocks. PCPs are at the center of care management activities for most Medicare beneficiaries and primary care is generally under-provided. Because PCPs account for a small share of total expenditures, it is possible to provide large financial incentives with modest shared savings proportions, perhaps 20 to 30 percent. However, because they account for a small share of total costs, PCPs are unable to assume financial risk. Therefore, a PCP-led ACO must include a mechanism to pay for reasonable infrastructure costs while retaining the upside-only risk characteristic of the current Medicare Shared Savings Program (MSSP). Each PCP group should also be eligible for a shared savings payment if it generates savings, regardless of the performance of the entire ACO.


Jeff Goldsmith

Associate professor of public health sciences at the University of Virginia and president of Health Futures, Inc., a health analytics firm

We are actually ten years in, not three.  The ACO model was first tested in the Physician Group Practice demonstration, which began in 2005.  The results of that demo greatly resemble those of the past three years:  less than a fifth of the ACOs generate the vast majority of savings, and those failing to generate bonuses outnumber bonus winners three or four to one.  Prominent among the “failures” are respected provider systems with decades of successful managed care experience in both the commercial market and Medicare Advantage.  This isn’t a new idea.

You can make any program “work” if you employ Lake Wobegon accounting.  Hire a friendly consultant to do your program evaluation, instead of a respected independent evaluator (how about the HHS Office of Planning and Evaluation?).  Count the “savings” but ignore the overruns.  Don’t count the bonus payments as a “cost.”  Don’t count ACO set-up or operating costs (so we cannot determine the return on investment from participation).  Don’t share the savings with Medicare beneficiaries.  And voila, it “works.”

The CMS Innovation Center is a young agency with a very full plate.  It has an audience, including Congress, health service research experts and the provider community.

Its leadership needs to establish its credibility in order for its innovations to take hold.  Picking the ACO as its lead project was a bad decision, and one that has not enhanced the center’s credibility.


Michael Chernew

Professor of health care policy and director of the Healthcare Markets and Regulation Lab in the Department of Health Care Policy at Harvard Medical School

The existing data unambiguously shows that overall the Pioneer program saved a little bit of money for CMS. There should be two separate questions: One of them is before health care providers shared the savings, did they save Medicare any money? And is after they shared the savings, did they save Medicare any money? I actually think the first question is more important because it speaks to the long run savings and sustainability of the model.

Mike McWilliams and I, along with other colleagues published a paper that found the first year of the Pioneer program saved money by cutting spending by about 1.2 percent. But it saved money even after savings were shared. We don’t have enough data yet on the MSSP program to make judgments, but I wouldn’t conclude that they haven’t saved money.

I also speculate that over time we will see bigger savings and more organizations participate.  Medicare has tweaked the rules to make the program more attractive to providers. In addition, ACOs can help providers get beyond the Affordable Care Act’s productivity adjustments that will reduce the rate of growth in fee-for-service payment rates to hospitals and other providers. The ACO model allows these organizations to transfer some of the efficiency gains they make into bottom-line savings. If they reduce admissions, if they reduce readmissions, if they reduce wasteful use of diagnostic services, they can keep some of those savings. When they keep those savings, it doesn’t look great if Medicare’s spending is higher than it would have been if the savings were not shared. On the other hand, the incentives of sharing helped generate the savings in the first place and they might allow those providers to survive.

We need to put the health system on a sustainable spending trajectory. Even though the Pioneer plans saved a relatively modest amount, we seem to be moving in a reasonable direction.

You don’t expect to get a lot of the savings early, but if you can get providers to do things that will control the rate of spending growth, over time you will get a payoff. What we need to do now is not worry about 2016, but worry about the health care system in 2025. I believe that looks better if we continue on this path. Moreover, the alternatives are not great.

I don’t mean that success is easy and I don’t mean to imply that all organizations will succeed. This is not without risk. I am personally a bit optimistic. But I don’t think success is a foregone conclusion. It is very hard for many organizations. Undoubtedly, some will fail.


Sean Cavanaugh

Deputy administrator and director of the Center for Medicare at the Centers for Medicare & Medicaid Services

CMS’ ACO initiatives are off to a successful start because beneficiaries are receiving measurably better care and the trust funds are saving money.

In the Pioneer Model and the Medicare Shared Savings Program, which collectively provide care to more than 8 million Medicare beneficiaries, ACOs improved care from one year to the next and consistently outperformed fee-for-service providers in areas where there are comparable quality measures. In the third performance year, Pioneer ACOs showed improvements in 28 of 33 quality measures and experienced average improvements of 3.6 percent across all quality measures. Shared Savings Program ACOs that reported quality measures in 2013 and 2014 improved on 27 of 33 quality measures. In addition, Shared Savings Program ACOs achieved higher average performance rates on 18 of the 22 Group Practice Reporting Option Web Interface measures reported by other Medicare fee-for-service providers reporting through this system.

In addition, an independent evaluation report for CMS found that the Pioneer Model generated more than $384 million in savings over its first two years, while the CMS Office of the Actuary has certified that an expansion of the Pioneer Model would be expected to save the trust funds additional funds.  While the actuary has not opined officially on cost savings in the Medicare Shared Savings Program, the program’s financial results are in line with those that we expected. And early results show that ACOs with more experience in the program tend to perform better over time. Among ACOs that entered the Shared Savings Program in 2012, 37 percent generated shared savings, compared to 27 percent of those that entered in 2013, and 19 percent of those that entered in 2014.

Another sign of success has been the growth in interest in the ACO model. The Shared Savings Program now includes more than 420 Medicare ACOs serving more than 7.8 million Americans with original Medicare.  The Shared Savings Program continues to receive strong interest from both new applicants as well as from existing ACOs seeking to expand and continue in the program for a second agreement period starting in 2016. Next year, CMS will launch the Next Generation ACO model, which has also garnered significant interest among providers.

ACOs are a part of our vision of a system that delivers better care, spends our dollars in a smarter way, and puts patients in the center of their care to keep them healthy.

Medicare experiment looks like ‘faux managed care’


By JORDAN RAU and  JENNY GOLD for Kaiser Health News

A high-profile Medicare experiment pushing doctors and hospitals to join together to operate more efficiently has yet to save the government money, with nearly half of the groups costing more than the government estimated their patients would normally cost, federal records show. Providers don’t want to gamble on taking a  financial risk in the program.

The Centers for Medicare & Medicaid Services offers the lure of bonuses to healthcare practitioners who band together as Accountable Care Organizations, or ACOs, to take care of patients. The financial incentives are intended to encourage these physicians, hospitals, nursing homes and other institutions to keep patients healthy rather than primarily treat illnesses, which is what Medicare payments traditionally have rewarded. ACOs that save a substantial amount get to keep a share of the savings as a bonus.

The Obama administration touts ACOs as one of the most promising reforms in the 2010 federal healthcare law. The administration set a goal that by the end of 2018, half of Medicare spending currently based on the volume of procedures a doctor or hospital performs will instead be linked to quality and frugality. But so far the ACO program generally has been a one-way street, with most doctors and hospitals happy to accept bonuses while declining to be on the hook for a share of any excessive costs run up by their patients.

Last year, Medicare paid $60 billion to 353 ACOs to take care of nearly 6 million Medicare beneficiaries. Some ACOs made significant strides in reducing use of hospitals and other costly resources. But patients at 45 percent of groups cost Medicare more than the government had projected based on their patients’ historic costs, records show. After paying bonuses to the strong performers, the ACO program resulted in a net loss of nearly $3 million to the Medicare trust fund, government records show.

“It’s turning out to be tougher to transform care and realign delivery than people had expected,” said Eric Cragun, an analyst with The Advisory Board Company, a consulting group based in Washington.

Medicare officials said most ACOs are still in their infancy, and that performances will improve with experience and ultimately save significant sums for Medicare while improving care for beneficiaries. “In the long run we’re shooting to achieve those goals,” Sean Cavanaugh, CMS’s deputy administrator, said in an interview.

Nonetheless, the results are short of what Medicare projected in 2011 as it launched the program. Those estimates anticipated the government would save between $10 million and $320 million during 2014.

‘Bearing Risk Is A Big Leap’

The ACO program’s bottom line has been hurt by the reluctance of most ACOs to accept financial responsibility for their patients. Only 7 percent of ACOs opted last year for a high-risk/high-reward deal in which they had the potential to earn larger bonuses but would have to reimburse the government should their patients instead cost Medicare more than expected.

The rest of the ACOs opted to avoid the potential of financial punishment even though it meant their potential bonuses would be smaller. The risk aversion proved so widespread that Medicare has given ACOs up to six years to participate without fear of penalties, instead of phasing out that option.

“Many of these ACOs are newly formed groups of doctors and hospitals, and bearing risk is a big leap,” Cavanaugh said.

Last year, 196 ACOs saved Medicare money, while 157 ACOs cost more than expected. Medicare ultimately did not realize any savings because it paid out bonuses to 97 ACOs, but only three of the costly ACOs had to repay Medicare for losses their patients incurred.

In Oregon, North Bend Medical Center ACO patients cost Medicare $9 million. Spending for those patients was 12 percent more than projected, the largest gap of any ACO. In Los Angeles, the government spent $20 million, or 11 percent, more than expected for ACO patients at Cedars-Sinai Medical Care Foundation. That was the largest amount in dollars. Both ACOs had chosen to be exempt from financial penalties.

North Bend dropped out of the program earlier this year.

Cedars-Sinai said its ACO patients ended up more expensive than other previous patients because the hospital added new physician practices specializing in cancer and heart disease, which are among the most costly conditions to treat. Cedars said last Thursday that it unintentionally failed to include those patients in the comparisons it sent to Medicare and was now revising its calculations.

Even some of the ACOs that saved the most money have yet to accept financial risk. Costs for patients at Winchester Community ACO in Massachusetts were 16 percent less than Medicare estimated. The ACO earned a bonus of $5 million. Catharine Robertson, an executive with Winchester Hospital, said their cost-saving initiatives were created when the ACO was formed. One team at the ACO identified patients as high risk of getting sick and sought to intercede before they ended up requiring hospitalization.

“We’re absolutely thrilled with our success the last few years, but the reality is there’s a lot to learn about population-based management,” she said.

The largest bonus in dollars, $23 million, went to Memorial Hermann Accountable Care Organization in Houston, which was 11 percent below Medicare’s cost expectations. Christopher Lloyd, the CEO of Memorial Hermann’s ACO, credited its success to a decade’s worth of changes that improved cooperation among physicians and the hospital, as well as the creation of systems to share medical details of patients.

“The ACO when we formed it in 2012 was just an extension of what we were already doing,” Lloyd said. He said committed ACOs could make the same improvements in three to four years. “What took us 10 years to build does not take 10 years to replicate,” he said. Still, Memorial Hermann, like Winchester, is not yet accepting risk.

Difficulties In Implementing The Program

To wring overall savings for Medicare, the government faces a bind, analysts said. If Medicare makes the potential of repayments mandatory, many existing ACOs may drop out of the program and new ones are less likely to join. If the majority of ACOs continue to risk no financial repercussions, they have less incentive to save the government money. And without showing savings, it will be hard for Medicare to expand the program.

Clif Gaus, president of the National Association of ACOs, said Medicare should be making it easier for ACOs to earn bonuses as they assemble their operations. “Any start-up company, I don’t care who they are, never makes profits in the early years,” Gaus said. “Starting a healthcare delivery system is just as hard, if not harder, than starting a Facebook or an Amazon.”

Because Medicare sets its expectations based on national spending averages, “it’s really hard to save money in some parts of the country,” said David Muhlestein, an executive at the consulting firm Leavitt Partners based in Salt Lake City. “We’ve talked to ACOs that have joined the program, started to make changes and decided that it’s really too much work right now.”

Sharp Healthcare, a well-regarded five-hospital system in San Diego, dropped out of the program last year after concluding it might not be able to avoid penalties. In a financial statement, Sharp said that because Medicare’s assessments are “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.”

Jeff Goldsmith, a health-industry analyst and professor at the University of Virginia who is a longtime ACO critic, said the ACO model is flawed. Consumers do not actively opt to participate in the ACOs and do not share in any savings, so they lack financial incentives to help keep costs down, he said. ACOs also have limited leverage to control the costs incurred by highly paid specialists such as surgeons and cardiologists. Patients in ACOS can still go to any doctor who accepts Medicare’s regular method of paying, in which they receive a set fee based on the nature of the service without regard to its outcome.

“Faux managed care is actually harder to do than real managed care,” Goldsmith said. The ACO program, he said, “has a bad enough reputation in the provider community that is not going to grow sufficiently to replace regular Medicare.”

The Obama administration is more optimistic. The administration said patients are benefiting with better care, as most quality measures Medicare is using to track ACO performance improved between 2013 and 2014.

CMS’ actuaries believe the ACOs are performing better than they appear when compared to the historical benchmarks that the health law established, which CMS has been using. The actuaries employed an alternative method in a report issued last spring, comparing Medicare spending trends in places with ACOs and those without, and concluded that, overall, ACOs were saving money.

Still, ACOs’ appetite for taking risk remains small. The number of ACOs opting for the largest potential bonuses and penalties has shrunk from 32 at the start of the program to 19. Rob Lazerow, an Advisory Board consultant, said, “In a world where ACOs are still optional, CMS still has to make it attractive for providers to want to participate.”

MSSP model called ‘not sustainable’


Medicare Accountable Care Organizations had $411 million in total savings in 2014, but few of the Pioneer and Medicare Shared Savings Program (MSSP) ACOs qualified for bonuses in the program’s second year,  say the latest data from the Centers for Medicare & Medicaid Services (CMS).

CMS reported that only 97 of the 20 Pioneer ACOs and 333 MSSP ACOs qualified for shared savings payments  by meeting quality standards and their savings threshold. Still,  the  results indicated that the ACOs with more experience in the program tend to perform better.

Some observers  say that the CMS benchmarks to win savings rewards are too rigid, with the perfect being the enemy of the good.

Clif Gaus, chief executive officer of  the National Association of ACOs,  complained:

“This is not a sustainable business model for the long-term future. 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.”

He estimated that  40 to 50 ACOs will leave the MSSP program this year unless the government takes steps to improve the program, including changing the risk-adjustment formula, setting  target benchmarks, eliminating the ‘penalty-only’ quality scoring and providing financial rewards for improving quality.



Many hospitals are cost-cutting in wrong places


Navigant Healthcare Managing Director Bruce Hallowell says in a recent interview in  RevCycleIntelligence  that too many hospitals and healthcare systems overlook where there is management duplication. He says that they may be focusing on the wrong places.

He  asserts, that, among other things:

When hospitals do cost reductions, they look at cost, not outcomes. This takes their bottom line away. There is a bad habit in healthcare of treating everybody like a Medicare patient, so Medicare pays on DRG (diagnosis-related group) and we don’t get paid based on things like length of stay. There’s a huge effort to cut length of stay. When I’m cutting cost, I need to cut costs in the appropriate area.”

He says the best overall way for hospitals to consider costs is: “You have to look at it from the holistic approach. What are the costs that are actually costing me something in my different payer levels? Is it a utilization or a variation? How do I get rid of variation and not worry about the number of days?”

His view of  changes from  new payment methodologies:

If you have two underperforming units at two different hospitals that are five miles apart, if we moved them to one facility, they would be a high-performing function, but we don’t want to make those tough decisions. The new payment methodologies will force the healthcare industry to make tough decisions, such as do I really need four OB units within ten miles of each other or do I need one? ACOs (Accountable Care Organizations) – basically capitation with no control – are starting to look at risk components, making sure we get continuing of care from beginning to end provides an idea of how cost is structured.”

On ICD-10’s effects on  hospitals’ revenue and reimbursement situations:

ICD-10 is going to have a bigger impact on hospitals from a revenue and cash standpoint than anything else that’s coming right now. I have to get past that before I can deal with ACOs  and bundled payments. ICD-10 is the biggest threat to any income. ” (For laypersons: ICD-10 is the 10th revision of the International Statistical Classification of Diseases and Related Health Problems.)

“People who are not taking it seriously understand it from a technical standpoint and not a process standpoint. The threat is impending change that has a direct impact on reimbursement and that’s where my cash and investment comes from….”


Stop penalizing high-performing ACO’s



James Weinstein, M.D., and William Weeks, M.D.,  both affiliated with Dartmouth’s medical complex, write that Medicare should end its penalty for high-performing hospital systems under the Accountable Care Organization model.

At the start of their piece in Modern Healthcare they write:
“Imagine a company that produces a high-quality product, operates efficiently and generates $16 million in year-over-year savings. Then imagine that the company is not allowed to retain those savings, but is assessed a financial penalty. Hard to imagine? Well, it’s a reality in the American healthcare system today.”They elaborate: “It is … important to recognize that participation in the program required these ACO’s to make the expensive upfront investments in information technology and case- management personnel that are indispensable to success in shared-savings models. And, while these investments improve quality, they also reduce healthcare utilization, which reduces per capita Medicare revenue—the basis for shared savings.”Given these high initial investments, anticipated lower Medicare revenue and the lack of well-designed incentives, this financial model is struggling for wider adoption. When Medicare established the Pioneer ACO shared-savings model in 2011, 32 healthcare systems participated in the effort; today 19 remain. ”

“{H}istorically, Dartmouth-Hitchcock {Medical Center} has had very low Medicare per-beneficiary costs. Under the Pioneer ACO model, program results are measured against an annual cost target, instead of on year-over-year improvement. Using this method, healthcare systems with high baseline costs…have a lot of room for improvement, while those with low baseline costs—such as Dartmouth-Hitchcock—do not,” they explain.

“Just as it is easier for an athlete who runs a 10 minute mile to run faster than it is for one who runs a 4 minute mile to do so, it is easier for providers with high baseline healthcare costs to reduce them than it is for providers with low baseline healthcare costs to do so.”

“Given the Pioneer ACO program’s flawed current incentive structure, Dartmouth-Hitchcock is deciding whether to continue to participate.”

Good news for California ACO’s


An analysis  by the Berkeley Healthcare Forum group in the School of Public Health at the University of California, Berkeley, shows that Accountable Care Organizations in California are growing in size and number and improving care quality.  The Golden State has 67 ACO’s — more than any other state.

The study suggests that ACO’s are moving toward achieving the goal of 60 percent of the California population receiving integrated care by 2022.

The report is called “A New Vision for California’s Healthcare System.”

Based on the Integrated Healthcare Association’s (IHA) quality measures, groups that also have ACO contracts have  similar scores for treatment of heart disease and asthma, and better scores for cancer, diabetes, pediatric care, and chlamydia  than other medical  organizations in the state (excluding the special case of fully integrated Kaiser Permanente) and higher patient- experience score measures.









More ACO’s but number of patients relatively small


An Oliver Wyman analysis says that even as many providers drop out of Medicare’s Pioneer Accountable Care Organization, the  total number of ACO’s continued to rise last year, albeit at a slower pace than in 2013.

Perhaps most significant is that nearly 70 percent of Americans now live in an area served by an ACO, up about 3 percentage points from the year before.

There were 426 Medicare ACO’s as of January 2015, up 58 from a year earlier. In the  previous year,  ACO’s increased by  a roaring 234. FierceHealthcare said that besides the Medicare ACOs, the report identified 159 others, to  come to a 585 total, up 12 percent  from 2014.

But there’s a long way to go. As Modern Healthcare reported:

“About 5.6 million Medicare patients, or 11 percent, will receive their healthcare from an ACO, but while ACO’s increased by about 16 percent, the number of patients receiving care from them only increased 6 percent, which the report attributes to smaller ACO’s joining the Medicare program.”


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