40% Have Dropped Out of ACOs

More hospital systems are dropping out of the Medicare Pioneer Accountable Care Organization (ACO) program. Recently four more hospital systems joined the ranks of the departing. These recent departures include systems in California, Michigan, Indiana, and Pennsylvania. To date, 40% of the original have dropped out of the program, all citing similar reasons which are based on rules that are too strict and benchmarks that are unobtainable.

In the case of the Michigan system, they were able to lower Medicare spending by $20 million but at a cost to the organization overall. The CEO stated they simply could not make the economic model work. The Indiana system was able to increase quality but not costs of patient care and thus did not receive a shared savings payment. In fact, 60% of the hospital systems in the pioneer program did not receive a shared savings payment in 2012.

Other data shows that of the ACOs started in 2012, 53% were not able to lower expenditures in the first year. CMS states the ACO programs are meant to create savings over the long term. But, with all of the other financial pressures providers are facing, how many will stick it out for the years it takes to show savings and thus receive shared savings payments?

There continues to be other roadblocks to general ACO success. Two key areas are that payers are reluctant to offer ACO contracts and the fact there has not yet been a proven ACO model. Regarding the payers, this is a free and capitalist society so movement from the payers will be dependent upon how it benefits them . . . period. Regarding the lack of a proven model, there are some ACOs that appear to be doing well. It will take time for those to be analyzed in detail (and honestly) and determinations made as to whether models can be duplicated throughout the country. Everyone working in the healthcare industry acknowledges the mantra, “healthcare is local”, so time will tell if ACO models can be replicated.


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