Why CMS’ Pioneer ACO Program Fails to Deliver

July 18, 2013

Nine of the 32 pioneer ACOs are calling it quits. The problem is execution, not concept.

I believe that accountable care organizations (ACOs) can save Medicare, but only if they, and CMS, are honest about first round missteps, learn from them and correct them. Sadly, there are few signs that this is the plan.

Of the 32 pioneer ACOs, two lost $4 million, 13 “saved” $87.6 million and, overall, the Medicare Trust Fund came out “ahead” by $33 million because it stemmed increased costs to a three-tenths of a percent increase compared with regular providers’ 0.6 percent increase.

In the aftermath, two pioneers bailed out completely and seven opted to go back to the Medicare Shared Savings Program, which the ACO initiative is supposed to replace. CMS and the rest soldier on for another year having learned and accomplished almost nothing. Citing quality improvements on arbitrary metrics is a pale attempt to put this pig into a party dress and get it a date with the press.

The strategy of obfuscating their real performance with unmeasurable statistics and selected factoids fails all Americans and puts the entire healthcare system at risk of falling prey to broader implementation of failed policy and execution. While this blunt assessment of facts may seem cynical and harsh, the consequences of failing to confront them and implement solutions is far worse.

A good example is how Gene Lindsey, M.D., president and CEO of the multispecialty physician group Atrius, one of the pioneer ACOs staying with the program, explained their performance: “Our objectives were not to do well in a particular financial cycle. We believe the payoff is going to be the accumulated clinical transformation.”

Atrius actually increased the cost of care by about $2 million in 2012.

Lindsey also added that Atrius had already adopted cost-control measures that left it without easy savings and Atrius' financial hit in the short term obscures the progress it made to improve healthcare quality and efficiency. More recent performance has improved, according to Lindsey, and early and unprofitable investments are expected to deliver a financial return in coming years.
Really? Healthcare quality improved and spending went up? When something as fundamental as identifying and focusing care on high-risk patients to keep them out of the hospital would result in millions in reduced spending in an organization that size? Avoiding just one out of 20 admissions would do it, and would make a far bigger difference in those people’s lives than shortened wait times.

Drawing these conclusions without really knowing what measures have been taken by Atrius may or may not be unfair, but, there is a tell, and it is endemic to CMS’ regulated programs - a focus on cost rather than spend.

Healthier patients use less services. A lot less. So do happier patients. And better-educated and engaged patients. Overpowering and complex regulations do nothing to contribute to this fundamental, a repeatedly proven truth, and they are a hallmark of CMS Innovation’s many misdirected control points.

Focusing on stalling or reversing the progression of chronic disease requires coordination, diet, exercise, medication compliance, eliminating gaps in care, and, most importantly, caring. None of these are achieved by managing costs, but each, and all, of them impact how much is spent, quality of life, effect on family and friends and society as a whole. This segment represents 80 percent of the overall spend for seniors, and it is rife with waste and inefficiency.

Coordination of care is really communicating information to keep everyone on the same clinical page including, and especially, the patient. Managing care, not price, is the true key to success in the ACO world. Those who understand these essentials not only outperform their peers, they do so by broad margins.

This leads to an example of another group practice ACO member that understands this dynamic, Heights Medical in New Jersey. Already a high-performing primary-care group, they focused on improving and maintaining their patients’ conditions in 2012 and on other fundamentals, including care coordination. They reduced their 2012-2013 12-rolling-month Medicare spending by 36 percent to 64 percent of average Medicare spend, one third less than their ACO peer group. Heights beat them on every other measure by a mile.

CMS Innovations would do well to find out how they do it and to emulate the clinical model.