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CMS Names 32 Pioneer ACOs, Predicts Up to $1.1 Billion in Savings

By John Reichard, CQ HealthBeat Editor

December 19, 2011 – The Centers for Medicare and Medicaid Services announced last week that its program to promote team-based care in traditional Medicare will launch with 32 "pioneer" accountable care organizations in 18 states, serving up to 860,000 Medicare beneficiaries.

"The pioneer ACO initiative will encourage primary care doctors, specialists, hospitals and other caregivers to provide better, more coordinated care for people with Medicare and could save up to $1.1 billion over five years," HHS said in a news release.

The pioneer program allows the Centers for Medicare and Medicaid Services to get off to a robust start in launching the ACO effort, which otherwise may be slow to develop. ACOs are the centerpiece of efforts by the Obama administration under the health care law (PL 111-148, PL 111-152) to implement new ways to control spending in traditional Medicare.

HHS officials said 160 organizations submitted letters of intent to CMS stating that they wanted to form pioneer ACOs. Eighty actually applied. From that group, CMS picked the 32, in some cases deciding that applicants were not ready. In other cases, applicants themselves decided they did not want to participate, officials said.

The $1.1 billion in potential savings may actually exceed projected savings achieved by other ACOs that come in through the standard program—even though a larger number of organizations could participate in that effort. The standard program, which gets off the ground next year, could save up to $1 billion in its first few years—but that's a best-case scenario.

Many provider organizations in the United States are not organized to work together to provide the kind of team-based care the administration is hoping will save Medicare money and boost its quality by reducing duplicative or unnecessary testing, eliminating medical mistakes and improving preventive care.

"We know that health care providers are at different stages in their work to improve care and reduce costs," said Marilyn Tavenner, acting CMS administrator. "That's why we've developed a menu of options for Medicare to meet doctors, hospitals and other health care providers where they are, and begin the conversation of how to enhance the care they are offering to people with Medicare."

The pioneer group stands out from ACOs that will come later in several ways. They'll be subject more quickly to penalties if they don't meet savings targets, but they also will be able to get higher payments if they do meet those targets, for example.

"The first two years of the Pioneer ACO Model are a shared savings payment arrangement with higher levels of savings and risk" than in the standard program, a CMS fact sheet said.

Another difference is that if pioneer ACOs deliver savings in their first two years, they will qualify in their third year for "population-based" payment. That is a "per beneficiary per-month payment amount intended to replace some or all of the ACO's fee-for-service payments with a prospective monthly payment," the fact sheet said. A third difference is that pioneer ACOs will have to develop contracts with other payers for team-based care that lowers spending and boosts quality. The intent is to spur organizations sponsoring ACOs to more fully commit to team-based care.

The Center for Medicare and Medicaid Innovation, the branch of CMS responsible for the pioneer program, said that pioneer ACOS must enter into ACO-type contracts with other public and private payers such that those payers account for more than 50 percent of the pioneer ACO's revenues by the end of its second year.

Hospitals have a very strong presence among the 32 organizations selected, although in a fair number of cases "individual practice associations"—networks of private doctors' offices—or big medical groups are sponsors.

The list of 32 includes multiple ACOs in Wisconsin, Massachusetts, Michigan and California.

Organizations on the list include the Beth Israel Deaconess Physician Organization and Partners Healthcare in eastern Massachusetts, the Dartmouth-Hitchcock ACO in New Hampshire and eastern Vermont; Fairview Health Systems and Park Nicollet Health Services in the Minneapolis metro area, the University of Michigan, and Sharp Healthcare System in San Diego.

Richard Gilfillan, head of the Innovation Center, predicted that pioneer ACOs would deliver bigger savings than did a precursor program called the CMS Physician Group Practice Demonstration Program. That's because participants in that earlier program weren't subject to financial penalties if they didn't meet savings targets, he said. Also, the requirement to contract with other public and private payers will help ensure that pioneer ACOs have stronger infrastructures to deliver savings, he said.

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