Mixed Results in Health Pilot Plan
Program Members Raise Quality of Care but Struggle to Lower Costs
Lowering health-care costs is tougher than improving the quality of care, according to first-year results from a key pilot program under the federal health law.
All of the 32 health systems in the so-called Pioneer Accountable Care Organization program improved patient care on quality measures such as cancer screenings and controlling blood pressure, according to data to be released Tuesday by the Centers for Medicare and Medicaid Services. But only 18 of the 32 managed to lower costs for the Medicare patients they treated—a major goal of the effort.
Two hospitals lost money on the program in the first year. Seven have notified CMS that they intend to move to another program where they will face less financial risk. Two others have indicated they intend to leave the program, CMS says, but it declined to identify them.
ACOs are an emerging concept in which hospitals and groups of doctors contract to care for a specified population of patients, with the goal of improving quality and lowering costs by better coordinating care. In general, ACOs are shifting to a system that pays doctors to keep people healthy, as opposed to the volume of services they provide. To do this, many systems emphasize preventive care to stave off costly hospitalizations.
The pilot program is a closely watched first indicator of whether these pillars of the landmark federal health law can help transform care. However, some analysts said it is unsurprising that more participants didn’t achieve savings in the first year, given that the program has three years to achieve its goals.
As outlined in the Affordable Care Act, health systems that lower the cost of care for a large group of Medicare beneficiaries, while meeting 33 quality measures, stand to split the savings with Medicare. The systems chosen as Pioneers were supposed to serve as models, since they were already experienced in providing such value-based care.
The Obama administration says it is pleased with the results on quality measures. “Overall, we are very excited about the results. It’s incredibly rare that 100% of the participants outperform benchmarks,” said Patrick Conway, chief medical officer for CMS and acting director of its Innovation Center, which runs the program.
The Pioneers were able to slow cost increases, according to the initial indicators. On average, costs for the more than 669,000 Medicare beneficiaries treated in the 32 Pioneers grew by only 0.3% in 2012, compared with 0.8% growth for typical Medicare beneficiaries, CMS said.
The ACO concept has spread quickly. Another 250 health-care systems have set them up under Medicare’s Shared Savings Program, which is similar except that those ACOs aren’t required to share in any losses, as Pioneers are. They stand to share only in the savings in the first two years.
Commercial insurance companies have set up nearly 200 ACO-type contracts with health-care systems. Last week, UnitedHealth Group Inc. said it expects to double its accountable-care contracts to $50 billion by 2017. More than a dozen states also have created ACOs to care for Medicaid patients.
As of January 2013, the Shared Savings ACOs were providing care for more than four million Medicare beneficiaries in 49 states, according to Levitt Partners LLC, a health-care consulting firm.
Of the 18 Pioneers that saved money, 13 saved enough to be able to split their savings with Medicare, generating a gross savings of $87.6 million in 2012. Among them was Partners Healthcare in Boston, which includes Massachusetts General.
“We did great. We saved about $14.4 million for Medicare, and will get back a little over $7 million,” said President and Chief Executive Gary Gottlieb.
He said that about 70% of the system’s patients are still under traditional “fee-for-service” contracts, where a hospital is paid separately for the individual services it provides. However, on the basis of the pilot-program results, he said he expects to move toward the ACO model “as we continue to demonstrate cost savings and quality improvements.”
Bellin-ThedaCare Healthcare Partners in northern Wisconsin lowered costs for its 20,000 Medicare ACO patients by an average of 4.6% compared with the baseline population the program used for comparison. It stands to share in several million dollars in savings.
Executive Director David Krueger said the health-care system reduced hospital admissions rates, readmission rates and length of hospital stays for its ACO patients. “All that would be very bad news in a fee-for-service world, but in a shared-savings world, it’s very positive news,” he said.
One of the two that incurred losses was Atrius Health, a nonprofit alliance in eastern and central Massachusetts. Officials there said one difficulty Atrius faced was that the historical cost-per-patient it needed to beat was already unusually low, because they had lowered costs in years before. “We didn’t have as much low-hanging fruit,” said Emily Brower, executive director of the ACO.
She said Atrius may owe Medicare about $2 million, but the total amount won’t be known until the next quarter. But she said the system has no plans to leave the program.
Many health-care analysts said they weren’t surprised that more Pioneers didn’t achieve savings—in part because many of their other patients are still under traditional payment contracts. “It’s like being a little bit pregnant,” said Chas Roades, chief research officer of the Advisory Board Co., which advises hospital systems. “It’s hard to manage two separate sets of books, and it’s hard to ask doctors to practice medicine in two different ways.”
When organizations undertake major health-care reforms, “it’s a marathon, not a sprint,” said Mark McClellan, former administrator of CMS who now directs the Engelberg Center for Health Care Reform at the Brookings Institution, a left-leaning Washington think tank. Significantly lowering the cost of care is harder and takes more time than showing improvements in quality.
“It’s a big step just to be able to track which of your patients has diabetes, let alone improving their care at less cost,” he said.
Write to Melinda Beck at HealthJournal@wsj.com