The Growing Pains of Pioneer ACOs

When the Centers for Medicare and Medicaid reported the results from the first performance year of the Pioneer Accountable Care Organization Model, the agency indicated that the participants held Medicare cost increases below those for the general Medicare population, resulting in more than $33 million in savings to the Medicare Trust Fund for 2012.

However, while 25 of the 32 participants generated savings, only 13 received a share of savings, and two pioneer ACOs had to return funds to the program under the sharing of loss aspect of the program. Furthermore, nine of the pioneer participants have announced that they are leaving the program.

Is the program a success, or a failure?

“I think it’s too soon to be definitive,” says Phil Polakoff, MD, chief medical executive and senior managing director in FTI Consulting’s health services practice. “Accountable care organizations take more than a year or two to have a big impact on costs.”

Having patience

Change, Polakoff says, takes time. People, whether they’re patients or physicians, don’t change over night. That’s why he believes the numbers don’t tell the full story of which pioneer ACOs succeeded and which did not.

“One ACO’s strategy to keep patients healthier and out of the hospital is to get them to be more compliant in taking their drugs,” Polakoff explains. “That will deliver substantial savings. But you won’t see this for a couple years. People just don’t change over night.”

He also points out that ACOs typically save money in stages. In the early stages, the low-hanging fruit comes easy, but doesn’t amount to that much, dollar-wise. The later stages can produce dramatic improvements in both costs and quality, but they require much more sophistication and effort.

“Changing people is not an easy process,” Polakoff says. “Getting physicians to work collectively and to have defined data on how they’re using evidence baselines doesn’t happen over night. The technology is not end-to-end and seamless just yet. So there are major structural issues as we go through this inflection point in the health transformation process. And it’s both very, very exciting, but also challenging.”

Keys to success

Fred Geilfuss, an attorney with Foley & Lardner’s health care industry team, believes that several health care organizations are signing up (as ACO pioneers) to test themselves and their ability to coordinate care and report on quality.

“They see that population health management is going to be the future, and payment for outcomes is going to be the future,” Geilfuss says

Several pioneer ACOs have indicated that refined data analytics were key to their success. Geilfuss heartily agrees.

“I think without them, it’s very difficult to achieve positive results,” he says. “And I think if you look back to the early ’90s, there wasn’t the same kind of data sharing that we have today. And that’s one reason that the HMOs were much less successful then. You have to have the data to be successful, I think.”

Polakoff agrees, but emphasizes having the right data is just as important.

“The data you get from the health plan is retrospective; it’s after you’ve been to the doctor,” he explains. “The data you get from an electronic medical record is prospective; it’s real time. You need both, and you need them well defined.”

Challenges going forward

A client alert issued by Foley & Lardner’s health care industry team reveals the concerns of one of the departing pioneer ACOs over the ability to continue to reduce costs against an ever-changing baseline.

“I think it’s going to be a challenge to have this as a sustainable model,” Geilfuss says. “If there’s a downside where you have to pay money back if you don’t succeed, or your benchmarks are lowered, I think that makes it much more challenging. And I would not be surprised to see some entities back out because of that.”

Polakoff echoes those thoughts, equating the pioneer ACO model to startup companies or venture capitalists. Out of 10 investments there are one or two home runs, four singles or doubles, and five washouts.

“I think the strong will survive,” he says. “Whether it’s called ACOs, whether it’s population health management, the system is changing. There is a law of the land; there is a Supreme Court decision. Even though there is a lot of political infighting we will be moving from a paper service to pay-per-value based performance. We cannot continue to have such a highly fragmented, pragmatic, inefficient and ineffective system. I think everyone will agree. And I think all the parties in the equation will have to learn that there probably will be less in the future. There will have to be more collaboration, creativity, and innovation. That’s the challenge, I think.”