Medicare Pioneer ACOs Saved $118M in First Year

A study on the Medicare Pioneer Care Organizations (ACOs) showed that while the program achieved a savings of $118 million in its first year, adjustments are necessary for its success going forward. 

Researchers at Harvard Medical School found that spending reductions associated with the first year of the Pioneer ACO program amounted to $76 million in bonuses paid to ACOs by the Centers for Medicare and Medicaid Services (CMS) and a $42 million for Medicare, for a total of $118 million. However, they note that program needs tweaking, citing the 13 ACOs that dropped out of the program after 2012, despite achieving savings that were similar to those that stayed in the program.

“There is growing evidence that alternative payment models can curb spending while improving or at least maintaining quality of care,” stated lead author J. Michael McWilliams, Ph.D., M.D. associate professor of health care policy and medicine at Harvard Medical School and Brigham and Women’s Hospital. “But building on the early success of these models in Medicare will depend on getting the incentives right.”

McWilliams says that the savings generated by the Medicare ACO model does not cover the up-front investment costs required to cut costs and improve outcomes. Many of these costs, of course, are associated with health information technology systems, which help ACOs track their populations. The researchers also say that Medicare shouldn't penalize ACOs that lower Medicare spending with lower benchmarks in subsequent years because it weakens their incentive to ever save.

The researchers, which say they used different methods for analysis than CMS, also found that being in an integrated care network was not a requirement for ACO success. Those in independent physician groups achieved similar savings. 

“There is a lot of hope that transitioning to new payment models might help Medicare meet its serious fiscal challenges. Continued evaluation of the impact of these programs on spending and outcomes will be crucial to assess whether this hope is justified and to guide efforts to refine the rules governing these models," McWilliams said.

The research was published in The New England Journal of Medicine.