Pioneer ACOs Saved Medicare $118 Million in Year One

Savings were similar in accountable care organizations with "financial integration" between hospitals and doctors, and those without, which suggests that this form of provider consolidation is not necessary for ACOs to reduce Medicare spending, research shows.

Medicare's 32 Pioneer Accountable Care Organizations saw modest improvements in quality at a marginally lower cost in their first year of operation, a new study shows.

The report, published in The New England Journal of Medicine, estimates that the Pioneer program saved Medicare about $116 per beneficiary each year, or about $118 million in 2012, its first year of operations.

"Contributing to these estimated savings were reductions in spending on acute and post-acute care as well as an apparent substitution of care in lower-priced office settings for care in higher-priced hospital outpatient departments," the study found.

House Calls Key to Pioneer ACO Success

"The first year of the Pioneer program was not associated with significant changes in the rates of readmissions, hospitalizations for ACSCs, or screening mammography, but was associated with slight increases in the rates of use of preventive services in diabetes care. Together with a recent study examining the experiences of patients in ACOs, our findings suggest that Pioneer ACO contracts have been associated with some early savings and either unchanged or improved performance on quality measures."

The savings report comes after large defections from the Pioneer ACO program. Of the original 32 participants, 13 had left the program by fall of 2014, citing inconsistent results and financial losses. Three of the Pioneers had to pay back CMS between $1.61 million and $2.89 million, and six other organizations received no shared savings.

Lead author J. Michael McWilliams, MD, an associate professor in the Department of Health Care Policy at Harvard Medical School, says there are indications that these savings are not a one-year phenomenon of ACOs plucking the low-hanging fruit.

"There are both conceptual reasons and empirical evidence suggesting that one would expect growing savings with experience under alternative payment models," McWilliams said in an email exchange.

"As payment changes from fee-for-service to incentives rewarding value, the delivery system will need time to restructure to respond effectively to those new payment incentives. Organizations will need time to learn what works and what does not. Changing physician practices to support more cost-effective care may also take time. Finally, as risk-contracting becomes common across multiple payers, providers will have stronger incentives to control spending."

Future Savings 'Will be Harder to Come By'
McWilliams says separate research on the Alternative Quality Contract in Massachusetts, a commercial ACO, showed growing savings each year from the first to fourth years. 

"Eventually, yes, savings will be harder to come by as organizations achieve greater levels of efficiency," he said. "This is consistent with our findings and suggests the need for incentives to maintain high levels of efficiency in addition to achieving them."

The study found the savings were similar in ACOs with "financial integration" between hospitals and doctors, and those without, which suggests that this form of provider consolidation is not necessary for ACOs to reduce Medicare spending.

"Our findings also suggest that ACOs with higher baseline spending, whether it was due to less-efficient practices or unobserved differences in case mix, were able to reduce spending more easily, at least initially, than ACOs with lower baseline spending," the study said.

"In addition, we found that savings occurred among the 13 ACOs that subsequently withdrew from the Pioneer program, whereas CMS had calculated minimal savings or losses for 12 of these ACOs in comparisons with benchmarks."

What the study did not find was a relationship between estimated savings and continued participation in the Pioneer program, which they suggest means that "sustaining or expanding participation in a Pioneer-like ACO program will probably require greater and more reliable rewards for ACOs that reduce spending than those currently in place."