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Pioneer ACO Results as Bumps in the Road to Better Population Health Management

Miami, FL — October 28, 2014 – Earlier this month, CMS posted the financial and quality results for years 1 and 2 for the Pioneer ACO program. While this event passed with little notice in the press it is significant for providers who have been accepted into a larger Medicare Shared Saving Program (MSSP) or who may be thinking of doing so in the future.

The pioneer model ACO was initially designed for healthcare organizations and providers that showcased experience in coordinating care across a variety of settings. The program was to allow provider groups to move rapidly from a shared savings model to a population-based payment model on a track that was consistent with, but separate from, the larger and less risky MSSP.

The data recently published by CMS indicates the pioneer business models may need tweaking to provide a path to greater population health management:

  • Out of the 32 original pioneer ACOs, nine have dropped out with eight reporting an increase in spending over their targeted budgets. Seven of these joined the less risky MSSP. Three additional programs deferred reconciliation of year two results until the end of year three.

  • Sixteen organizations reported gross savings in year one and 12 in year two. Only five organizations managed to improve their year two savings results over year one. This indicates that some of the initial success of the organizations who reported a profit in year one was related to the provider organizations ability to harvest low hanging fruit in markets with higher Medicare utilization and costs.

  • With some exceptions provider organizations in markets such as New York, Boston, and southeastern Michigan with a high per capita Medicare spending reported better results than organizations in more tightly managed markets (such as Minneapolis or Denver).

  • A number of the provider organizations who dropped out of the program after year one (i.e. Presbyterian Healthcare Services in Albuquerque and Physician Health Care Partners in Denver) operated in a market with very low Medicare per capita expenditures to begin with. On the other hand, Seton ACO in Austin, whose costs increased 2.2% over budget, and Plus! North Texas ACO whose costs grew 5.2% faster than projected (both dropped out of the program) operated in a markets with relatively high Medicare per capita cost.

Certainly geographic location has an impact on the viability of an ACO Medicare Shared Savings strategy. But the data from year 1 and year 2 Pioneer results indicates the key variable in profitability in any shared savings program is the effectiveness of patient care and clinical case management as opposed to geographic or market location.

“The Pioneer ACO program results from year 1 and year 2 reinforces our concerns about the risk of over reliance on the MSSP as an organization’s strategy for the Medicare market,” said Krista Bowers, Managing Director of BDC Advisors. “Even experienced organizations with the infrastructure in place to manage care, face a 2%-3% threshold they must beat before they can share savings. The Pioneer program results show this can be a tough hurdle to get over.” Bowers points out that only 13 out of 32 programs earned savings the 1st year and 11 of the remaining 19 in year 2.

Bowers concludes that, “given the short half-life for shared savings opportunities — the bar is continually raised– developing a strategy to accept risk for Medicare Advantage—either as an owner of a plan or a contractor—is the most attractive means of participating in the Medicare market. Medicare Advantage plans can be profitable on a smaller scale when compared to commercial plans because premium levels are higher and risk exposure is limited through risk adjustment.” Many of the functions of a successful Medicare Advantage Plan, in fact, are similar to those required for a MSSP ACO:

  • physician alignment and care management

  • network design, contracting, and management,

  • CMS reporting and compliance, and

  • member communication.

Bowers added: “while participation in the MSSP is preferable to continued reliance on Medicare Fee For service, the Pioneer ACO program results reinforce our belief that participation in MSSP should be seen not as the end game, but as a training ground for participation in Medicare Advantage. Medicare Advantage remains the most effective path for providers to move towards better population health management. “

BDC Advisors is a national healthcare consulting firm headquartered in Miami, which specializes in strategic business planning and business diversification for large integrated healthcare delivery systems, academic medical centers, and managed care organizations.

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For more information, contact Pattie McCann, Marketing Manager at or 805-428-2039


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