Flawed Shared Savings and Pioneer ACO programs are here to stay, consultant says

Although many organizations participating in the Medicare Shared Savings and the Pioneer Accountable Care Organization programs failed to generate savings in 2014, Navigant Healthcare consultant Paul Keckley thinks the programs are here to stay despite several flaws.

According to the most recent data released by the Centers for Medicare and Medicaid Services, nearly 28 percent of participating ACOs earned bonuses in 2014 for a total $456 million, though the bulk of those organizations have more experience in risk-sharing models.

[Also: See which shared savings ACOs earned payments in 2014 (Data)]

That means nearly 75 percent of ACOs in the program earned no savings, despite largely improving the quality of their care based on their benchmark results.

According to Keckley, those results can be tied to several weaknesses in the program. For starters, new organizations make significant financial investments just to get their ACOs off the ground.

"In most organizations, the costs of implementing an ACO by a physician group and or a hospital/business partner exceed the savings they'll get from Medicare long-term. This is especially true for provider groups that had no prior experience in risk-sharing arrangements with payers requiring advanced care coordination and necessary infrastructure to track results. The original estimate of "all in" costs was $2 million per ACO, but costs between $5-7 million have been common for these ACOs," Keckley wrote in a post in Navigant's website.

There are also significant costs associated with tracking the clinical measures tied to the programs.

[Also: See how Pioneer ACOs performed in 2014 (Data)]

At the same time, Keckley argues that the financial incentives are harder to obtain the more efficient the ACO is.

"The current shared savings model rewards those organizations in communities where historic utilization and costs were high, and challenges efficient organizations--physicians and hospitals--where the opportunity to reduce costs and utilization is less. For ACOs in markets where costs and utilization are already low, incentives to maintain needs consideration," he said.

But despite those weaknesses, Keckley doesn't think the risk sharing accountable care organization model is going to fail, especially since Medicare costs are expected to rise so much in coming years.

"The ACO, with its savings formula sweetened and its compliance risk reduced, could be the most significant lever CMS can use to slow the growth of Medicare expenditures. Along with bundled payments, it's the one-two punch Medicare is counting on when, in January, it announced it goal that 50 percent of its payments will be made through alternative payment models including ACOs in the next two years," he said.

Keckley also said the ACO model is among the best for truly coordinating care across a healthcare organization, a major driver of many of today's healthcare reforms.

"Clinical integrated networks are necessary to replace redundant tests or unnecessary care with services that are evidence-based and efficient," he said. "The care coordination focus of ACOs drives the system toward better care at a lower cost whether paid for on the basis of volume or value."

[Also: Dartmouth-Hitchcock may exit Pioneer ACO program, officials say]

Keckley also said the ACO model excels when it comes to improving, and placing more importance on primary care.

"Bundled payment programs focus on episodes of care that put a spotlight on activities involving hospitals and specialists. By contrast, ACOs put a premium on effective primary care that's comprehensive, holistic, team-based and accessible. That's the rationale behind the requirement that ACOs be structured around Patient Centered Medical Homes. And both ACOs and bundles put a premium on coordination of care in post-acute settings and management of patient behaviors to avoid unnecessary admissions, tests and complications that add substantial cost."

Still, attrition remains a big problem for the ACO model. The Pioneer program already lost 12 participants, and two more, Darmouth-Hitchcock and Beacon Health, are mulling an exit.

Twitter: @HenryPowderly