Pioneer ACOs work—and are ready to expand, Medicare officials say

Results from the first two years: Slower cost growth, fewer inpatient stays

The Pioneer ACO program successfully saved Medicare nearly $400 million in spending over two years—and as a result, CMS is now authorized to begin rolling out elements of the program nationwide, actuaries say.

According to data released Monday by CMS, expenditures for Medicare beneficiaries receiving care through Pioneer ACOs increased less than expenditures for non-ACO, fee-for-service (FFS) beneficiaries in the program's first two years. The finding by independent actuaries means the Pioneer ACO program just became the Affordable Care Act's first alternative payment program to be certified to cut cost while improving quality.

“There were people, not so long ago, asking if the Innovation Center would ever certify a model,” Patrick Conway, CMS deputy administrator for Innovation and Quality, told the Wall Street Journal. “This allows us to expand components of the Pioneer program nationally.”

(See the Advisory Board's take on CMS's announcement.)

Background on Pioneer ACOs

Under the Pioneer program, which launched in January 2012, participating providers contracted 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. The program was designed to reward early adopters of coordinated care models and offer the health industry an example of successful outcomes-based pay models.

However, some participants took issue with the structure of the program. By last year, 10 of the original 32 Pioneer ACOs had dropped out of the program, with some moving into the Medicare Shared Savings Program.

Why some Pioneer ACOs are dropping out

Latest results

According to the new data, which were published in JAMA, CMS saved an estimated $385 million in the first two years of the Pioneer ACO program.

Specifically, researchers found that the increase in expenditures from the 2010-2011 baseline for the average beneficiary aligned with a Pioneer ACO was $35.62 less in 2012 and $11.18 less in 2013 when compared with non-ACO, FFS beneficiaries. Overall, the slower spending growth generated about $280 million in savings in 2012 and $105 million in savings in 2013.

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

Researchers attributed the slower expenditure growth primarily to decreases in inpatient utilizations among beneficiaries aligned with the ACO, as well as:

  • Decreases in office visits for primary care evaluation and management; and
  • Smaller increases in the number of tests, procedures, and imaging services.

The researchers found no decrease in 30-day readmissions for ACO-aligned beneficiaries, but they did note that the number for follow-up visits for discharged patients was higher for the ACO patients

Meanwhile, beneficiaries in the ACOs reported higher satisfaction with clinician communication and timely care than other Medicare beneficiaries.

"These results are encouraging, given how historically challenging it has been for physicians to achieve spending reductions in Medicare demonstration projects," the researchers wrote in JAMA. They explained, "Despite decreases in spending growth, results from this study and previously reported data on Pioneer ACOs' performance on clinical quality measures suggest it is possible to reduce expenditure growth while maintaining or improving quality in a FFS payment environment" (JAMA release, 5/4; Pradhan, Politico Pro, 5/4 [subscription required]; Beck, Wall Street Journal, 5/4).

The Advisory Board's take

Chas Roades, Chief Research Officer

Clearly, the Pioneer ACO program has generated significantly more savings than the Medicare Shared Savings Program. That’s not surprising given that the program was designed for advanced ACOs, and that certain features of the Pioneer program—beneficiary attestation, the more favorable incentive model—are more favorable.

As Medicare pushes toward its goal of getting half of all Medicare payment into alternative payment models by 2018, they’re taking advantage of what they’ve learned from the Pioneer program to fill out the range of risk options in the broader Medicare program. As providers consider when and how to shift to the ACO model, this expanded range of options—including the “next-generation ACO” and the proposed "track 3" of the MSSP— merit consideration.

In particular, the shift to a regionally trended benchmark in the Next-Generation model should be very attractive to systems in relatively low-cost markets, who have struggled to generate savings in the traditional MSSP program.

The big picture: Understand Medicare's big move to value-based pay


HHS this year unveiled ambitious goals for reforming Medicare payments for hospitals and physicians that would make 30% of payments through alternate payment models like ACOs and bundled payments by 2016. And some key private payers have made a similar pledge. Read our Q&A with Rob Lazerow to understand what the "historic" commitment means for providers.

Then, download our easy-to-navigate field guide to Medicare payment innovation, which explains how ACOs, bundled payments, pay-for-performance penalties, and other programs fit into the Medicare payment landscape.

Next in the Daily Briefing

What to know about the GOP budget deal

Read now