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Will More Pioneer ACOs Defect?

 |  By cclark@healthleadersmedia.com  
   September 02, 2014

A lack of financial viability, cited by some organizations as a reason for abandoning the program, does not surprise one longtime critic of the federal accountable care organization program.

Sharp HealthCare's withdrawal from the Centers for Medicare & Medicaid Services' Pioneer ACO program, brings the number of defecting organizations to 10 out of the original 32 and raises questions about how many of the other 22 will remain in the program.

A CMS spokeswoman said in an e-mail late Friday that the agency is not ready to release information about who remains in the Pioneer program.

San Diego-based Sharp said in a statement that its decision to withdraw was based on the Pioneer model's "financially detrimental," formula. Although the five-hospital organization had reduced hospital readmissions, as well as hospital and skilled nursing facility utilization among its 28,000 attributed beneficiaries, the financial performance was just "breakeven."

Alison Fleury, Sharp ACO's CEO, said in a statement that "The Pioneer financial model is based on national financial trend factors that are not adjusted for specific, often unrelated, rate implications that an ACO is facing in a particular region (e.g., San Diego). As a result, the financial impact can be detrimental to the ACO despite favorable underlying utilization and quality performance."

CMS's Center for Medicare and Medicaid Innovation is said to be working on adjustments in 2015. Sharp supports that effort, Fleury said. "It would not be prudent for us to place our ACO at financial risk in 2014 as we wait for these changes to be implemented."

Lack of viability of the Pioneer model as a reason for abandoning the program does not surprise longtime critic of the Medicare ACOs, Nate Kaufman, a San Diego-based consultant. "As we predicted, the Medicare Shared Savings programs and the Pioneers were structured to fail," he said, citing difficulty in making the numbers work.

Kaufman says that's particularly true for California, which has seen three of its original six Pioneers drop out since day one. The other two are Healthcare Partners Medical Group of Los Angeles and Orange counties, and Prime Medical Network of San Bernardino and Riverside counties.

That's because California, with its higher penetration of managed care, already had low Medicare beneficiary utilization especially in the most expensive sector, inpatient care. That fact thwarts success in a program that requires year-over-year improvement such as the Pioneer model.

In 2011, the year before the Medicare's ACO programs began, California had the 44th lowest hospital inpatient days per 1,000 Medicare beneficiaries in the country, according to the Henry J. Kaiser Family Foundation.

In areas of higher utilization, such as the District of Columbia, South Dakota and North Dakota, a Pioneer ACO might be able to find fat to trim, Kaufman argues.

"If you're in California, or really anywhere in the West, there's no more to get, because we've already wrung out all the utilization."

At the time of this writing, it could not be determined if Heritage California ACO of Northridge or Monarch Healthcare ACO of Irvine, operating in Southern California, remain in the program.

Nevertheless, Pioneer ACOs in some low-cost regions of the country are hanging in there. A spokesman for Dartmouth-Hitchcock ACO of Lebanon, NH, covering New Hampshire and Eastern Vermont, says that Dartmouth-Hitchcock "remains in the Pioneer program and intends to do so going forward." New Hampshire's utilization is just a bit higher than California's, but that system is seeing benefit.

So is Brown & Toland Physicians, which has some 19,000 Medicare beneficiaries attributed in the San Francisco Bay Area, says CEO Richard Fish, who explains that in the first year, the organization saw success with its algorithm and realized significant gain sharing.

Fish and Stephanie Mamane, vice president of payer contracting and accountable care, say that the group's experience with Medicare Advantage plans gave them a head start in knowing how to coordinate care.

But they also accomplished three other things that helped them succeed. First, Fish says, they focused on "the tip of the iceberg," those patients with the most chronic conditions that are the most expensive. "That's where we made the most significant difference."

Second, although the practice group has 1,500 physicians, "we were very strategic in the physician networks," says Mamane. "For the Pioneer program, we selected just under 200 physicians for attribution purposes. We're working with a small cohort of our physicians who are already practicing well-coordinated care among themselves and their patients, who are being treated within our network."

That may be a concern for other Pioneer organizations, because Medicare rules require that no restrictions be placed on beneficiaries who seek care outside the ACO network. If they do, there's a risk for duplication or unnecessary services that can get attributed back to the ACO and lower their chances for gain sharing.

San Francisco's geography also favors Brown & Toland, Mamane says. "We're concentrated in a smaller area, and our patients are generally seen or admitted at one of a few hospitals versus many hospitals. We have strong relationships with our hospital partners. And we know when there's a Pioneer ACO patient in one of our partner hospitals."

Mamane says that an additional benefit is that San Francisco Medicare beneficiaries are "pretty sophisticated, and pretty engaged with their health care."

Fish and Mamane say they know they are doing well with the model because even though CMS has yet to release the second year data, "we have internal reports, and our metrics show we've reduced the admission rate, the readmission rate, and we have supported better use of skilled nursing facilities."

And Brown and Toland is entering its third year confidently, Mamane says. "There is still room to improve for those most complex patients."

That's an important issue. In an April issue of JAMA Internal Medicine, Harvard researchers published an analysis of 145 organizations participating in some form of a Medicare ACO. The report showed "distinct challenges in achieving organizational accountability."

"Over one-third of beneficiaries attributed to an ACO in 2010 or 2011 (before the start of the ACO) was not assigned to the same ACO in both years," they wrote. Because Medicare does not require beneficiaries to select a primary care physician, how costs of care and services are attributed can be problematic.

Additionally, much of the outpatient specialty care for patients assigned to ACOs, particularly higher cost patients with more office visits and chronic conditions, "was provided by specialists outside of patients' assigned organizations, even among more specialty-oriented ACOs."

Despite these problems, the Medicare Shared Savings Plans, including the Pioneer program, have apparently seen some success in decreased utilization across the board.

According to CMS statistics from 2013 and 2014, the median number of inpatient admissions dropped from 370 to 335. The median number of emergency department visits went from 692 to 673. Use of CT went from 673 to 655, and use of MRI went from 272 to 269.

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