The Truth Regarding ACOs

The Centers for Medicare & Medicaid Services (CMS) released 2014 financial performance results for Medicare Accountable Care Organizations (ACOs) and despite CMS’ press release on the subject, the true results are still dismal.

Several months back, the National Association of ACOs (NAACOS) produced a report showing that of those participating in the Medicare Shared Savings Program, 66% did not intend to stay with the program and another 26% were undecided.  The president of NAACOS stated that if CMS doesn’t address issues, the program “will no longer exist and the high hopes of DC policy-makers to migrate ACOs to capitation and two-sided risk will be impossible.”  This report showed that respondents reported an annual mean of $1.5 million management costs directly attributable to ACO operations.

In CMS’ recent report, they correctly note that Pioneer ACOs “tend to be more experienced, have an established care coordination infrastructure, and assume greater performance-based financial risk.”  What they don’t mention in this release is that 37.5% of the original Pioneer ACOs have dropped out of the program.  “The drop in Pioneer ACOs is significant, because the shared-savings ACOs are supposed to end up looking like the Pioneer ACOs,” said David Muhlestein, PhD, director of research at Leavitt Partners, a Salt Lake City healthcare intelligence firm that tracks ACOs.

Of those remaining in the Pioneer ACO program, the CMS report shows that 11 qualified for shared savings payments.  It also notes that 25% of the Pioneer ACOs generated losses with penalties totaling $9 million to be paid back to CMS.  Leading health economist Paul Keckley, Ph.D. has commented that “It’s going to cost ACOs more than they save.”

Dr. Robert Pearl, chairman of the Council of Accountable Physician Practices confirms this notion.  “While ACOs might receive payment on a prepaid basis, the physicians and hospitals inside the ACO are often still reimbursed based on volume.  As a result, providers often don’t have an incentive to work together to find more effective ways to deliver clinical care. And when patients seek care outside of the ACO, physicians are at financial risk for care that may be unnecessary or inappropriate.”

So, are ACOs sustainable?  It most certainly does not seem so at this point in time.  As Dr. Pearl stated, “Even among the most efficient practices, the cost of delivering care must be adequately funded.  When payments are too low for physicians to deliver quality care and keep their practices viable, there is no good solution.”  And once again, healthcare reform fails to consider physicians as stakeholders.  “Physicians often feel relatively powerless and struggle to commit fully to the goals of performance improvement and cost containment,” says Dr. Pearl.


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