Medicare ACOs garner bonuses and penalties

Medicare’s accountable care organization initiatives have improved quality of care, but cost savings have proved more elusive.

ACOs that started in 2012 have so far reduced Medicare spending by $817 million, with hospitals and physicians keeping $445 million for their efforts, the CMS reported last week.

Those figures, which include results for about 250 Medicare Shared Savings and Pioneer ACOs, underscore the challenges of these experimental payment and delivery models. The ACO programs, launched under the Patient Protection and Affordable Care Act, reward doctors and hospitals that meet cost and quality targets for a defined beneficiary population; some ACOs face financial penalties for not meeting targets.

Eleven of 23 Pioneer ACOs earned financial bonuses that totaled $68 mil- lion during the program’s second year, while three faced penalties. Performance on quality improved for 28 of 33 measures.

In the Shared Savings Program, 53 of 204 organizations with available data slowed spending enough to receive bonus payments that totaled more than $300 million. One will face a penalty of $4 million.

Medicare started with slightly more than 110 ACOs in 2012 and now contracts with nearly 350 hospitals and health systems. The launch and operation of Medicare ACOs has been somewhat rocky. In June, the Brookings Institution released eight proposed policy changes.

New York’s Montefiore Medical Center ACO will keep $13 million of $24.5 million it saved last year in the Medicare Pioneer program, said Dr. Andrew Racine, Montefiore’s chief medical officer.

The organization continues to invest in primary and preventive care to reduce complications and prevent hospitalizations among the chronically ill.

Banner Health’s Pioneer ACO will keep $9 million of the $15 million it saved during its second year in the program. Chuck Lehn, CEO of the Phoenix-based system’s ACO, said Banner is pleased with its progress.

But Sharp HealthCare in San Diego recently said it would exit the Pioneer program, following nine other participants that withdrew at the end of the first year. The largest player in the Shared Savings Program—insurer Universal American—has backed out of several of its ACO ventures that struggled to produce a return.

The CMS introduced proposed changes to ACO quality reporting in July and is expected to release new rules for ACOs soon. It proposes offering ACOs a new bonus based on quality improvement.