Pioneer ACO progress and problems

The following originally appeared on The Upshot (copyright 2015, The New York Times Company).

Two recent studies of Medicare’s new way to pay for health care show that it’s reducing spending and improving quality. The problem is, health care organizations don’t always stick with the program.

Both studies examined Medicare’s 32 Pioneer Accountable Care Organizations. This program, and a related, similar one with a larger number of participants, offers health care organizations the opportunity to earn bonuses in exchange for accepting some financial risk, provided they meet a set of quality targets.

One study, published in the New England Journal of Medicine, found that in their first year, Pioneer A.C.O.s reduced spending 1.2 percent, relative to comparable patients who received care elsewhere. The other study, published in the Journal of the American Medical Association, found a 3.6 percent spending reduction in the first year and considerably less in the second year. (Though the studies reach broadly similar conclusions, their different savings estimates stem from methodological differences.)

Across a variety of measures, the two studies found that Pioneer A.C.O. quality of care held steady or improved.

Even if the overall savings are modest and assessed only in the first year or two of the program, the studies’ findings are good news for Medicare. Inspired by some of the nation’s most revered health care organizations — like Kaiser Permanente and the Mayo Clinic — Medicare’s A.C.O. program is its flagship reform initiative. It’s intended to promote the delivery of more efficient and effective care, paying more for value than for volume. Medicare has announced it intends to accelerate the transition from volume to value in the coming years. The new studies offer some confidence that it can do so while reducing spending and without harming quality.

However, there is still cause for concern. Thirteen A.C.O.s left the Pioneer program after the first year. Even though those A.C.O.s had saved money too, according to the studies, this is a troubling sign. A program that fails to retain its members cannot succeed in the long term. And, as these two studies cover only the first two years, despite the encouraging findings they do not provide information about what happened in the longer term.

Because the program is voluntary, an organization that can earn more by leaving, or one that anticipates it cannot recoup investments necessary to succeed, will not participate. One reason organizations may have dropped out is that payments decrease quickly as organizations become more efficient.

Dr. Michael McWilliams, lead author of the New England Journal of Medicine study, suggested that Medicare may achieve greater success over time with a more gradual approach that better balances the goal of achieving savings with the need to retain participants.

“Building on this early success will require greater rewards for A.C.O.s that generate savings,” Dr. McWilliams said.

Dr. McWilliams’s study also found that organizations that consolidated hospitals with physician practices performed no better than those that did not. This suggests that such consolidation — which has been rampant in the industry and drives up prices paid by commercial insurers — is not necessary to reduce Medicare spending and improve care.

“If financial integration between physicians and hospitals fosters more effective responses to new payment models, those efficiencies have not yet manifested among A.C.O.s,” Dr. McWilliams said.

The voluntary nature of the program also challenges study of it. Self-selection invites the possibility that organizations that opt in could be different from those that don’t, perhaps better able to reduce spending and improve quality. Randomizing organizations into the program — akin to a randomized controlled trial of medical therapies — would offer more certain estimates of the program. But it’s not practical to force such a large change on health care organizations, and possibly dangerous to experiment so directly with factors that could affect patient care.

The two studies’ researchers used a different approach to tease out estimates of the program’s effects. They compared changes in cost and quality experienced by beneficiaries in A.C.O.s with those of comparable beneficiaries served by other organizations. Dr. McWilliams’s study also tested whether those changes corresponded to the timing of A.C.O. participation. Since no changes were detected before program initiation, that provides confidence that the findings are because of the program itself.

The good news is that, at least in the first year or two of participation, A.C.O.s seem to spend less and deliver equivalent or better care than other health care organizations. The bad news is that many organizations drop out of the program, even as they’re succeeding.


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