Viability of ACOs in Doubt

During the health care debate, the Mayo Clinic, the Cleveland Clinic, Geisinger Health System and Intermountain Healthcare were repeatedly touted as models for a new health care delivery system. Now, they have something else in common: all four have declined to apply for the “Pioneer” program tailor-made by the Obama administration to reward such organizations.

“When the poster boys ask that the posters be taken down, you have a problem,” says Michael Millenson, president of Health Quality Advisors LLC. The lack of participation suggests that when push came to shove, the big players didn’t want to play by the complex and risky rules developed by the Obama administration.

The four health systems were considered the most promising models for Accountable Care Organizations (ACOs), a “new” approach to delivering health care services that supposedly rewards doctors and hospitals for providing high-quality care to Medicare beneficiaries while keeping costs down. The ACO provision became one of the most highly anticipated elements of the health care overhaul, and providers embarked on a frenzied race to join in as quickly as possible. But when the proposed regulation for the program was announced in March, excitement fizzled.

Hospital and doctor groups complained that the program created more financial risks than rewards and imposed onerous reporting requirements. The American Medical Group Association, which represents nearly 400 large provider organizations, responded with a letter to CMS warning that more than 90 percent of its members would not participate because of the reporting requirements and financial disincentives. In particular, the proposed rule would impose penalties for ACOs that do not achieve savings.

In response, HHS announced the Pioneer program in May, promising it would “provide a faster path for mature ACOs” like the Mayo Clinic that would allow the high-performing health systems to pocket more of the expected savings in exchange for taking on greater financial risk. HHS estimated that the Pioneer program could save Medicare as much as $430 million over three years.

However, lack of clarity and excessive risk is creating less-than-expected participation in the program, as health systems take a wait-and-see attitude. Accordingly, few providers will be able to meet the January 2012 launch of the Shared Savings Program.

ADVOCATE will continue to provide updates as they become available.

With best regards,
Kirk Reinitz, CPA
President & CEO