Study explores the reform wilderness of Pioneer ACOs

Performance of provider organizations enrolled in the Medicare Pioneer accountable care organization (ACO) program differed significantly in 2012, the program’s first year. In order to sustain or expand the program, according to a study published in the New England Journal of Medicine, researchers believe it may be necessary to require “greater and more reliable rewards for ACOs that reduce spending than those currently in place.” Additionally, the performance differences of organizations with high pre-enrollment spending and those with low pre-enrollment spending indicate that benchmarks for ACOs should be better tailored to the efficiencies of particular organizations.


Under Section 3021, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), authorized the creation of ACOs for Medicare in order to incentivize the formation of legal entities, compromised of multiple health care providers, who work together to coordinate care and keep costs down. Under the Pioneer model, “ACOs share in savings with Medicare if spending for an attributed patient population falls sufficiently below a financial benchmark and incur losses if spending sufficiently exceeds the benchmark.”


To evaluate the performance of ACOs in the Medicare Pioneer ACO program, the study reviewed Medicare claims data between 2009 and 2012. The study compared the performance of Medicare fee-for-service organizations with the 32 Medicare Pioneer ACOs. Specifically, for the year 2012, the study evaluated differences in spending and quality between traditional Medicare providers and the Pioneer ACO’s. Researchers also used data prior to 2012 to look into differences between the performances of organizations that had high spending prior to enrolling in the Pioneer program and organizations with relatively low spending prior to their participation in the Pioneer program.


The study estimated savings by ACOs in spending on acute inpatient care, hospital outpatient care, and post-acute care, particularly in skilled nursing facilities. However, the researchers also identified that “spending on outpatient care in office settings differentially increased in 2012 for the ACO group, partially offsetting the lower spending on hospital outpatient care.” Savings were greater for ACOs with baseline spending above local averages, while savings were lower for ACOs with pre-program spending below local averages. The study projected an “overall per-beneficiary estimate of -$29.2,” which suggests that the total Medicare spending for 2012 was approximately $118 million lower than expected as a result of the Pioneer program. According to the study, this figure “exceeds the $76 million in bonuses paid by CMS to Pioneer ACOs by $42 million.” Additionally, for the 13 ACOs that withdrew from the Pioneer program, estimated savings were comparable to those of the 19 ACOs that remained in the program.


The findings were consolidated by researchers into three issues pertinent to the future of the Pioneer ACO program: (1) a lack of a relationship between estimated savings and program participation; (2) the appropriation by CMS of savings generated by ACOs and the lack of strong incentives to participate; and (3) the need for more equitable benchmarks that do not unnecessarily favor organizations with higher pre-program spending.

Report: early lessons from Medicaid payment incentive waivers

CMS has granted seven state Medicaid programs the opportunity to conduct Delivery System Reform Incentive Payment (DSRIP) demonstration waivers. So far, there are preliminary results from four states, and the Kaiser Foundation has examined the lessons learned from their demonstrations.

Three of the states, California, Massachusetts, and New York, expanded Medicaid under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), while the fourth, Texas, did not. California’s waiver was approved for the period from 2010 to 2015, and the state currently is seeking renewal. The Massachusetts and Texas waivers were initially approved in 2011; Massachusetts’ three- year Delivery System Transformation Initiative (DSTI) was renewed in 2014 for a second three-year term. Texas is currently considering its options for extension of its waiver. New York’s waiver was approved to begin in 2015 after lengthy negotiations.

Changes to CMS process

CMS’ stance concerning terms and conditions has become more strict, at least partly in alignment with the agency’s general move to increase transparency and accountability with respect to the funding of demonstration projects generally. California’s waiver granted the state’s public hospitals leeway to determine their own projects, though they were required to meet defined metrics; the Massachusetts waiver allowed internal work groups to define the metrics for the projects they developed.

In New York, the waiver involves the creation of Performing Provider Systems (PPS), including hospitals and community-based health care providers. Each PPS must choose five of 44 possible projects. Not only must each PPS meet defined benchmarks, but the state as a whole must meet accountability measures and risks losing funding if it does not.

New collaboration and focus

The waivers have been instrumental in developing relationships among hospitals and other providers, such as community clinics and community mental health centers. To some extent this has helped to “break down the traditional silos” between providers. In Texas, urban teaching hospitals have begun to work with rural health care providers so that seriously ill patients can receive care in their communities rather than traveling. Texas providers also have tried innovations to improve care. One project involved training paramedics to visit with “frequent fliers” to help them fill prescriptions and meet other needs in order to reduce emergency room usage.

Change is hard, planning needed

Kaiser analysts found that the state agencies and stakeholders had difficulty coming up with measures that were quantifiable and appropriate to local needs. Providers who had not previously worked together closely had to do so. Sometimes providers were competing for Medicare and private pay patients but were expected to cooperate in treating Medicaid patients. In addition, small providers found the detailed recordkeeping and reporting required for the demonstrations to be burdensome. When projects were developed by local and regional hospitals, the protocols and benchmarks were not always consistent, making it difficult to measure the effectiveness of the program as a whole. Participants also felt tremendous pressure to implement complex changes right away.

Money talks

Much of the impetus for states to participate came from the need to preserve or maximize diminishing federal funding. The providers who could bring money to the table had a great deal of influence on how the projects were designed and implemented. For example, in Texas, the community mental health centers had funds to contribute. As a result, there was a greater focus on behavioral health care than there would have been without it. In New York, where the programs created incentives for hospitals to contact with PPS entities, some were concerned that finances, not the patients’ needs, would dictate patient referrals.

Sustainability concerns

The DSRIP funding has been replacing other payments to hospitals, so that the providers do not view them as temporary. Yet, the demonstrations are not intended to be permanent redesigns. CMS is reportedly urging states to plan for the expiration of the demonstration funding. The goals of the incentive programs overlap a great deal with those of Medicaid managed care, but only in New York has the demonstration linked DSRIP payments to managed care. The terms of its demonstration that 90 percent of managed care payments to providers must be made with value-based methodologies. In Texas, the coverage gap created by the choice not to expand Medicaid has limited the prospects for actual reform of the delivery system. It is unclear whether Texas or any other state will be granted a renewal or a new waiver without expanding Medicaid.

Care to compare? Hospital five-star rating system now available

As part of its initiative to add star rating systems to its comparison websites, CMS added a five-star rating scale to the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) Survey on its Hospital Compare website. CMS described the addition of the rating system as a joint effort between it and the Agency for Healthcare Research and Quality and stated that the addition will “make it easier to for consumers to use to the information on the Compare websites.” CMS also noted that the availability of this information is consistent with the goals of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), namely its call for transparency and more widely available public reporting. Early reports on the star-rating system indicate that a limited number of hospitals received a five-star rating thus far.

HCAHPS star ratings

The HCAHPS rating system was created in order to allow consumers to more easily compare hospitals through the use of patients’ opinions that have been used to form the rating of each individual facility. The HCAHPS Survey is described by CMS as “a standardized survey instrument and data collection methodology to measure patients’ perspectives of their hospital care.” CMS has already developed star-rating systems for other comparison websites including: Nursing Home Compare; Physician Compare; Dialysis Facility Compare; and Medicare Plan Finder (see Star search: CMS imposes ratings on dialysis compare site, Health Law Daily, January 23, 2015). CMS intends to add a rating system to the Home Health Compare website later this year.

Measures and methodologies

Twelve different star-ratings are available on Hospital Compare, including one for each of 11 measures developed by CMS and supported by groupings of topics reflected in the HCAHPS survey responses and one HCAHPS summary star rating, which “combines or rolls up all of the HCAHPS star ratings… and combines all information about the specific aspects of patient experience of care measured by the HCAHPS survey.” The 11 measures are divided up into three categories of topics: (1) composite topics, which includes issues regarding nurse and doctor communication, responsiveness of hospital staff, pain management, communications about medicines, discharge information, and care transition; (2) individual topics, which includes questions about “cleanliness and quietness” of the hospital environment; and (3) global topics, which includes questions on the overall rating of the hospital and the patient’s willingness to recommend that hospital.

All hospitals that participate in the HCAHPS Survey, including all inpatient prospective payment system (IPPS) hospitals and critical access hospitals (CAHs), are eligible to receive the ratings. Yet hospitals must have completed at least 100 surveys in the 12 month reporting period to be eligible. CMS will update the ratings on a quarterly basis.

Early reports and reactions

A Kaiser Health News report explained that many are skeptical of the accuracy of the star rating system as it “won’t accurately reflect quality and may place too much weight on patient reviews.” The report also found that 251 of the hospitals rated on the site so far received a rating of 5 stars. According to Kaiser, this represents only 7 percent of all the reviewed hospitals on the comparison site. Many of these hospitals are reportedly “hospitals that focus on lucrative elective operations such as spine, heart or knee surgeries,” and which “have traditionally received more positive patient reviews than have general hospitals, where a diversity of sicknesses and chaotic emergency rooms make it more likely patients will have a bad experience.”

Health spending accelerating faster than GDP growth

The amount of money spent on health is accelerating faster than the gross domestic product (GDP), according to an Altarum Institute spending brief. Spending in all health categories increased, with prescription drugs leading the pack. The brief suggests that low GDP growth is the main explanation for health spending taking a larger share, rather than a dramatic increase in health spending. According to some CMS projections, health expenditures will continue to grow faster than GDP through 2023, and will account for 19.3 percent of GDP by that date. In 2012, health care spending financed by all levels of government accounted for 44 percent, or $1.2 trillion. By 2023, government contributions to health care spending is projected to account for 48 percent, or $2.5 trillion.

The numbers

In 2014, national health spending grew by 5.2 percent, and health spending in February 2015 was 6.6 percent higher than the previous February. February 2015 GDP data was not yet available, but the GDP growth from January 2014 to January 2015 was 4.3 percent. Although the GDP fell in 2009, it is now 6.3 percent above the December 2007 GDP level excluding health care spending; the report identified December 2007 as the beginning of the recession. If health care is included, real GDP in January 2015 was 8.8 percent above the December 2007 level. By contrast, health care spending has increased by 21.8 percent over pre-recession levels.


Prescription drugs grew the fastest over the last 12 months, at 10.5 percent. Hospital growth was not far behind at 9 percent, which represents a significant amount of growth overall as hospital costs account for one-third of health spending. Prescription drug care growth has been consistently high for the past two years, with a peak of 13.1 percent in December 2014.