The Commonwealth Fund Blog

Expanding the Options for Accountable Care Organizations: The Pioneer Model, Part II

October 14, 2011

Tags: payment reform accountable care organizations Medicare

Mark Zezza SXG 75 X 75By Mark Zezza and Stuart Guterman

The Pioneer Accountable Care Organization (ACO) Model was launched by the Centers for Medicare and Medicaid Services (CMS) to help providers that are already coordinating care build a better business case for partnering with CMS in a shared-savings contract. Such a contract enables providers that reduce spending below targets to share in Medicare savings.

Along with providing more flexibility, the Pioneer Model gives providers the opportunity to achieve greater financial rewards than they would under the Medicare Shared Savings Program. In the first part of our two-part blog post, we compared shared-savings payments in the Pioneer Model and the Shared Savings Program. Today, we look at patient assignment, provider participation, the contract period, the governing board, and multipayer alignment.

Patient Assignment. Under any ACO framework, providers are held accountable for meeting cost and quality standards for a defined population of patients, which are assigned to ACOs based on where they typically receive primary and preventive care services. As proposed, the Shared Savings Program would do the assignment of patients after the performance year is over (i.e., "retrospective" assignment), so ACOs would not know exactly who their assigned patients are during the performance year.

Arguably, retrospective assignment helps ensure that ACOs treat all patients with the same high quality standards, since any patient they treat could be assigned to them. However, it could also incentivize providers to engage in practices during the performance year to avoid potentially high-cost patients. In addition, retrospective assignment makes it more difficult for ACOs to develop budgets for investments to improve care delivery, as it's harder to project shared-savings potential when the assigned population is unknown.

Participants in the Pioneer Model will have the option of using retrospective assignment or prospective assignment (that is, being told who they will be held accountable for before the performance period begins). There are pros and cons to prospective assignment as well. For example, prospective assignment can help ACOs develop clearer budgets for clinical innovation activities, as it removes some uncertainty about how much money will be available. However, there is concern that ACOs will target their assigned population for their care innovations. Also, some patients may change their provider preferences during the year, which could make it more difficult for the ACO to coordinate care for those assigned patients. Still, offering assignment options gives ACOs more flexibility to choose a model with which they are comfortable.

It should also be noted that there is a higher Medicare beneficiary assignment requirement for Pioneer ACOs: providers must have a minimum of 15,000 participating Medicare beneficiaries, as opposed to 5,000 in the Shared Savings Program. However, there will be exceptions for participating ACOs that have the majority of their member clinicians in rural areas—these ACOs will only need 5,000 beneficiaries to qualify.

In addition, some form of beneficiary attestation will be used in the Pioneer Model, which could lead to having more beneficiaries being assigned. That is, beneficiaries who have not recently visited a doctor for preventive care while enrolled in the traditional fee-for-service program will still have the opportunity to designate a Pioneer ACO as their principal source of care. This option will be open to newly eligible Medicare beneficiaries, as well as those who recently disenrolled from the Medicare Advantage program. The availability of alternative methods of patient assignment will allow CMS to test various approaches for application in future initiatives.

Provider Participation. There is greater flexibility in the types of providers that can apply to be ACOs under the Pioneer Model, which reflects the ability of the CMS Innovation Center to develop and test models other than the one specified in the Affordable Care Act. Federally qualified health centers (FQHCs), as well as all critical access hospitals (CAHs), can qualify to be a Pioneer ACO. Under the Shared Savings Program, FQHCs and some CAHs had to partner with other eligible provider types in order to participate in the program.

Also, a broader array of clinicians is eligible for patient assignment under the Pioneer Model. Under the Shared Savings Program, assignment is based only on utilization of primary care physicians. Under the Pioneer Model, nonphysician clinicians, such as nurse practitioners and physician assistants, as well as certain specialists (i.e., nephrologists, oncologists, rheumatologists, endocrinologists, pulmonologists, neurologists, and cardiologists) are eligible to be considered in the assignment of Medicare beneficiaries. This could help ACOs more effectively recognize patient preferences, as some Medicare beneficiaries may prefer to continue receiving primary care from clinicians other than primary care physicians. It also gives Pioneer ACOs more flexibility in how to improve access and effectively manage care.

Contract Period. Similar to the proposed Shared Savings Program, the Pioneer Model has three performance periods, ending in December 2012, 2013, and 2014. With the Pioneer Model, there is an option for two additional performance periods for calendar years 2015 and 2016, as long as the ACO can meet performance targets and generate savings in the first two performance periods. The extension could give providers more time to develop care innovations and to get a return on those investments.

Governing Board. There is more flexibility under the Pioneer Model for ACOs to demonstrate that their governing body is reflective of their member providers. The Shared Savings Program, as proposed, explicitly requires that at least 75 percent of the board comprise representatives from the ACO's participating provider groups. The 75-percent criterion is considered burdensome for some provider groups, such as those that are led by community cooperatives.

Multipayer Alignment. The Pioneer Model puts a greater effort on multipayer alignment by requiring that at least 50 percent of a participating ACO's total revenues come from outcomes-based contracts, which can include shared-savings contracts with private payers, as well as various other value-based purchasing initiatives. CMS plans to work with states to facilitate alignment of Medicare ACO efforts with Medicaid.

It is important to note that some details, as well as the start date, of the Pioneer Model are pending the contents of the final rule for the Shared Savings Program, which is expected to be released by Nov. 1. For example, CMS will want to ensure that the Pioneer Model uses similar performance measures to the Shared Savings Program. There are also provisions pending comments from interested providers, such as the alternative option for shared-savings payments. For this reason, CMS will allow Pioneer ACOs time to withdraw from the program if they find that the final details are not amenable to them. (Interested providers had to apply for the Pioneer Model in August.) CMS aims to include about 30 ACOs in the Pioneer Model. According to the Kaiser Health News, The Advisory Board Company estimates that 30 to 50 organizations have applied.

The Pioneer Model is the first in what is seen as a series of alternative payment models for ACOs, allowing more provider flexibility and reflecting CMS's recognition that there is more than one way to reach the goal of a more accountable, higher-quality health care system. It is also likely that each of these models will need to be refined as it is implemented. In fact, the differences in these models, and potentially others created through private, as well as other public initiatives, will offer great opportunities to learn what works well under different provider and market circumstances. It will be critical for CMS to systematically evaluate these initiatives and incorporate best practices into all health reform efforts, as appropriate and as quickly, but flexibly, as possible.