August 27, 2014

10 of 32 Pioneer ACOs have now dropped out of the program

Daily Briefing

    See the Advisory Board's take on why Pioneer ACOs are dropping out.

    San Diego-based Sharp HealthCare announced on Tuesday that it has dropped out of the Pioneer ACO program, the 10th Pioneer ACO to do so.

    Background on Pioneer ACO Program

    Under the Pioneer program, which launched in January 2012, participating providers contract with CMS to meet quality targets and assume new risk when caring for a set population of Medicare beneficiaries; in exchange, they received additional financial incentives.  

    Last year, seven Pioneer ACOs that did not produce savings in the first year of the Pioneer program switched to the Medicare Shared Savings Program (MSSP), and two abandoned Medicare accountable care models altogether.

    In 2013: Nine ACOs left the Pioneer program

    Details of the Sharp announcement

    Sharp, a five-hospital system whose ACO covers 28,000 Medicare beneficiaries, announced its plan to quit the program in its third-quarter financial statement released Tuesday. The company notified CMS of its decision on June 20.

    According to Alison Fleury, CEO of Sharp's ACO, the system broke even during the first two years of the program—and reduced readmission rates while improving its quality metrics. Sharp also was on track to meet quality benchmarks and was not at-risk of losing its Medicare funding.

     Fleury attributed Sharp's decision to drop out mostly to the financial model of Pioneer ACOs. She says, "Because the Pioneer financial model is based on national financial trend factors that are not adjusted for specific conditions that an ACO is facing in a particular region (e.g., San Diego), the model was financially detrimental to Sharp ACO despite favorable underlying utilization and quality performance."

    She notes that from when the program began in 2012 to now, San Diego's area wage index increased 8.2%, but because the Pioneer model does not take that into account, health systems have not received amplified regional payments.

    How one Pioneer ACO saved money—and why another one didn't

    Fleury adds that CMS understands there is an issue and she expects the agency will make changes to the 2015 model, such as incorporating regional criteria among these things. She says, "I'm hopeful they'll get it to a benchmark that does make it sustainable" (Herman, Modern Healthcare, 8/26 [subscription required]).

    The Advisory Board's take

    Hamza Hasan, Health Care Advisory Board

    When we've spoken with leaders of Pioneer ACOs, we've heard that patient churn and the network leakage issue as something they have really struggled with. And as it relates to choosing between the Medicare Shared Savings Program (MSSP) and Medicare Advantage (MA), they have found that patient churn and network leakage tends to be a lot lower in MA than MSSP.

    We see Sharp, and other care management pioneers, more likely to focus on risk contracts that will give them a greater ability to negotiate benefit design and patient attribution than in MSSP.

    For the rest of Hamza's comments click here.

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