In 2012, thirty-two organizations were selected to participate as “Pioneers” in a pilot Accountable Care Organization (“ACO”) program created through the Affordable Care Act (“ACA”).  The program’s goals were to revolutionize the health system and reduce medical costs by basing physician and hospital pay on quality rather than quantity.

ACOs are a centerpiece of the ACA.  In an ACO, physicians and health systems coordinate care to patients in an effort to reduce duplication of services or costs.  The Pioneer program awarded bonuses to providers offering quality care at reduced costs.  If certain quality targets were not met, or costs were not reduced, providers suffered a consequence.  ACOs were projected to save Medicare as much as $940 million through 2015 and result in over a billion dollars in bonus payments to providers.

On July 16, 2013, the Centers for Medicare and Medicaid Services released the Pioneers’ report card.  The long-awaited results are a mixed bag and may provide more questions than answers regarding the value and benefit of ACOs.

The thirty-two Pioneers generated a gross savings of $87.6 million in 2012, a favorable result.  Only thirteen Pioneers, however, saved enough money to share their savings with Medicare.  Another five lowered costs, but did not save enough to share.  Two Pioneers actually owed Medicare $4 million at the end of the pilot program, and nine of the thirty-two announced that they would be leaving the Pioneer model altogether.  Among those leaving the program are:

• Prime Care Medical Network, Inc.

• University of Michigan

• Physician Health Partners, LLC

• Seton Health Alliance

• Plus (North Texas Specialty Physicians and Texas Health Resources)

• Healthcare Partners Nevada ACO, LLC

• Healthcare Partners California ACO, LLC

• JSA Care Partners, LLC

• Presbyterian Healthcare Services

CMS’ report revealed that all thirty-two Pioneers successfully reported quality measures, resulting in incentive payments.  Notably, twenty-five of the thirty-two lowered risk-adjusted readmission rates for their beneficiaries compared to the benchmark rate for fee-for-service beneficiaries.  In addition, costs for the Pioneers only grew by 0.3% in 2012, while costs for Medicare beneficiaries who did not participate in ACOs grew by 0.8%.

Seven of the nine providers leaving the program will move into the Medicare Shared Saving Program (MSSP), another ACO model with lower risks and lower rewards.  Two of the Pioneers are leaving the ACO model altogether.

It remains to be seen whether the ACO model will be a satisfactory replacement for fee-for-service care.  There are certainly savings and bonuses to be found, but the program may not be as profitable as CMS and many providers had hoped.  Patients under the Pioneers’ care benefitted, but it is unclear whether the model will reduce costs and improve health care across the board in the long run.  While the Pioneers may have led the way into a new health care landscape, there is still much work to be done.