Editorials represent the opinions of the authors and JAMA and not those of the American Medical Association.


Pioneer Accountable Care Organizations Traversing Rough Country Lawrence P. Casalino, MD, PhD

In their article, Nyweide and colleagues1 present results from the first 2 years of the Pioneer accountable care organization (ACO) program. Like the Medicare Shared Savings ACO Program (MSSP), the Pioneer program rewards health care organizations Related article page 2152 that accept accountability for a population of beneficiaries and score well on measures of cost, quality, and patient experience.2 The Pioneer program gives ACOs the opportunity to gain a greater share of any cost savings they produce but also gives them more risk if costs for their population exceed targets. ACOs are one of the centerpieces of the Affordable Care Act, and understanding how they have performed is critical in the United States. Using a difference-in-differences approach, Nyweide et al compared the cost of care for Medicare beneficiaries for whom the 32 Pioneer ACOs were responsible with cost for other beneficiaries in their areas. The increase in cost per beneficiary was $36 per beneficiary per month less for Pioneer beneficiaries in 2012 and $11 less in 2013. Smaller increases in the cost of hospital inpatient care accounted for the largest share of the difference (nearly 50%), whereas physician services accounted for nearly 25%. Pioneer beneficiaries also had smaller increases in outpatient procedures, imaging, tests, and emergency department visits, although the differences between Pioneer beneficiaries and and those in the comparison group were small. Despite these decreases in utilization, Pioneer beneficiaries’ reported experience of care, including timeliness and ease of obtaining care, access to specialists, and clinician communication, was at least as high as for beneficiaries in the fee-for-service Medicare and Medicare Advantage programs. Nyweide et al provided few data relevant to the quality of care. They did show that the proportion of beneficiaries who saw a physician within 7 days of hospital discharge increased significantly more for Pioneer than non-Pioneer beneficiaries. However, there was no significant difference in readmission rates, which declined for both groups. Limited information available to date from other studies suggests that Pioneer ACOs are improving their performance on quality measures and perform at least as well as comparison groups.2-4 The relatively smaller increases in costs found by Nyweide et al are compatible with, but larger than, an earlier Centers for Medicare & Medicaid Services (CMS) estimate2,4 and a recent estimate for the first year of the Pioneer program.3 The differences result from multiple subtle differences in the methodologies used in these studies, but Nyweide et al had access 2126

to the most accurate data (eg, the physicians and beneficiaries actually included in the Pioneer ACOs, rather than estimates of these physicians and patients) and conducted multiple sensitivity analyses, which supported their estimates, and suggest these are the best data to date regarding cost savings associated with the Pioneer ACO program. Nyweide et al estimated that Pioneer ACOs achieved savings for CMS of $280 million in their first year. This represents a savings of approximately 4%. This amount may seem small, but if this rate of savings could be sustained, and achieved throughout a large part of the US health care system, it would be more than enough to “bend the cost curve” so that health care expenditures do not continue to increase as a percentage of the gross domestic product and the federal budget.5 Can this rate of savings be sustained? The Pioneer ACOs produced savings in year 2 that were one-third of year 1 savings. It is possible that during the first year these ACOs were able to “grasp the low-hanging fruit”—to address relatively easy ways to control costs—and that the savings they generate will be much smaller, at best, in subsequent years. Alternatively, it may be that it will take time for ACOs to develop better processes to improve the care of their patients and that they will be able continue to lower costs for years to come.6 Savings generated by ACOs will have little effect on US health care unless a large number of ACOs can do so. The 32 Pioneer ACOs were selected because they are sophisticated organizations thought to be capable of succeeding. But many organizations that have developed reputations for successful “population health management”—organizations like Kaiser and Geisinger—elected not to participate. Of the 32 original Pioneer ACOs, 13 have left the program. There are more than 400 ACOs in the MSSP program, but very few selected the higher potential reward/higher risk track available in MSSP.7 In theory, ACOs should be attractive to physicians. They provide an opportunity to proactively improve care for patients. They are an alternative to other methods of controlling costs, such as cuts in payment rates and extensive use of prior authorization.8 But for ACOs to be broadly successful, they will need stronger incentives, closer ongoing connections with patients, better logistical support from Medicare, and regulatory relief. For ACO programs to grow and be sustainable, physicians and hospitals must believe that they will be at least as well off financially if they become a high-functioning ACO as they would be if they continued with business as usual. This means that there must be substantial rewards for ACOs that perform

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Editorial Opinion

well in terms of cost, quality, and patient experience. For Medicare (and private health insurers) to reward high-performing ACOs while reducing costs overall, there will have to be winners and losers. Funds to reward successful systems will come from lower rates of payment increases over time for physicians and hospitals not in ACOs and from lower payments to low-performing ACOs. Medicare is already moving in this direction—for instance, in the 0.5% annual physician pay increases mandated in the recent bill that repealed the Sustainable Growth Rate.9 In addition, ACOs should be rewarded not only for improving their own performance—a difficult task, year after year, for ACOs that already perform well—but also for improving compared with their region and with the nation as a whole.10 Moreover, ACOs will need many more ACO-like contracts with private insurers so that they are not being reimbursed by some payers based on the volume of services they provide and by others based on constraining costs.11,12 Patients covered by ACO-like contracts of private insurers have strong financial incentives to seek care within the ACO, but patients in a Medicare ACO are free to seek care anywhere. ACOs contend that this makes it difficult for them to affect costs and quality, but several remedies are possible. First, CMS could do more to educate beneficiaries about ACOs. Second, Medicare could permit ACOs to waive all or part of patients’ co-pays and deductibles. Third, Medicare could provide a small financial incentive to patients who receive most care within an ACO. Fourth, an ACO could make it clear to patients, not by words but by ARTICLE INFORMATION Author Affiliation: Weill Cornell Medical College, Healthcare Policy and Research, New York, New York. Corresponding Author: Lawrence P. Casalino, MD, PhD, Weill Cornell Medical College, Healthcare Policy and Research, 402 E 67th St, Room LA-217, New York, NY 10065 ([email protected]). Published Online: May 4, 2015. doi:10.1001/jama.2015.5086. Conflict of Interest Disclosures: The author has completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and reported receiving personal fees for serving as a member of the American Medical Association Advisory Committee on Professional Satisfaction, Care Delivery, and Payment; serving, without financial compensation, as a member of the American Hospital Association Committee on Research, the board of trustees of the Health Research and Education Trust, and the American Medical Group Foundation board of directors; part-time employment as a senior advisor to the director of the Agency for Healthcare Research and Quality; and past service with 2 of the coauthors of the article by Nyweide and colleagues, as coinvestigator and coauthor, on articles unrelated to accountable care organizations. REFERENCES 1. Nyweide DJ, Lee W, Cuerdon TT, et al. Association of Pioneer accountable care

deeds—by the way it cares for them—that they are better off starting with their ACO when they need help. Logistically, it is critical that Medicare provide ACOs with timely data on their performance. In addition, the accuracy of “assignment” of patients to ACOs for purposes of measuring ACO performance should be improved, and ACOs should have a better idea, at the beginning of each year, which patients they are responsible for. It would help if Medicare patients could voluntarily “attest,” at the beginning of the year, that they are likely to seek care primarily from a particular physician or hospital (and thus be prospectively assigned, for measurement purposes, to the appropriate ACO).10 Regulatory relief would give ACOs more flexibility to care for patients in ways they believe best. For example, ACOs should be permitted to admit patients directly to skilled nursing facilities rather than being required to hospitalize them for 3 days first. There is rough traveling ahead for Pioneer ACOs and the ACOs that follow them. CMS is trying to clear the trail by creating the Next Generation ACO program,13 which includes many of the changes suggested above, and by improving the rules for the Pioneer and MSSP programs.7 The number of ACO-like contracts between private insurers is increasing rapidly.14,15 The next 5 years will be critical in determining if ACOs can indeed maintain or improve quality of care at a time when new therapies are emerging and simultaneously control the rise of health care costs.

organizations vs traditional Medicare fee for service with spending, utilization, and patient experience. JAMA. doi:10.1001/jama.2015.4930. 2. Pham HH, Cohen M, Conway PH. The Pioneer Accountable Care Organization Model: improving quality and lowering costs. JAMA. 2014;312(16): 1635-1636. 3. McWilliams JM, Chernew ME, Landon BE, Schwartz AL. Performance differences in year 1 of pioneer accountable care organizations [published online April 15, 2015]. N Engl J Med. doi:10.1056 /NEJMsa1414929. 4. L & M Policy Research. Evaluation of CMMI Accountable Care Organization Initiatives. Washington, DC: L & M Policy Research; November 3, 2013. 5. Cutler D. Analysis & commentary: how health care reform must bend the cost curve. Health Aff (Millwood). 2010;29(6):1131-1135. 6. Colla CH, Lewis VA, Shortell SM, Fisher ES. First national survey of ACOs finds that physicians are playing strong leadership and ownership roles. Health Aff (Millwood). 2014;33(6):964-971. 7. McClellan M. Kocot SL, White R. Changes Needed to Fufill the Potential of Medicare’s ACO Program. Health Affairs website. http://healthaffairs.org/blog /2015/04/08/changes-needed-to-fulfill-the -potential-of-medicares-aco-program-2/. April 8, 2015. 2015. Accessed April 12, 2015. 8. Crosson FJ. Analysis & commentary: the accountable care organization: whatever its


growing pains, the concept is too vitally important to fail. Health Aff (Millwood). 2011;30(7):1250-1255. 9. Steinbrook R. The repeal of Medicare’s sustainable growth rate for physician payment [published online April 17, 2015]. JAMA. doi:10.1001 /jama.2015.4550. 10. McClellan M, White R, Kocot L, Mostashari F. How to Improve the Medicare Accountable Care Organization (ACO) Program. Washington, DC: Brookings Institution; June 2014. 11. Casalino LP. Accountable care organizations—the risk of failure and the risks of success. N Engl J Med. 2014;371(18):1750-1751. 12. Toussaint J, Milstein A, Shortell S. How the Pioneer ACO Model needs to change: lessons from its best-performing ACO. JAMA. 2013;310(13):13411342. 13. Centers for Medicare & Medicaid Services (CMS). Next Generation ACO Model. CMS website. http://innovation.cms.gov/initiatives/Next -Generation-ACO-Model/. 2015. Accessed April 22, 2015. 14. Song Z, Chokshi DA. The role of private payers in payment reform. JAMA. 2015;313(1):25-26. 15. Muhlestein D. Growth and Dispersion of Accountable Care Organizations in 2015. Health Affairs website. http://healthaffairs.org/blog/2015 /03/31/growth-and-dispersion-of-accountable -care-organizations-in-2015-2/. 2015. Accessed April 18, 2015.

(Reprinted) JAMA June 2, 2015 Volume 313, Number 21

Copyright 2015 American Medical Association. All rights reserved.

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Pioneer accountable care organizations: traversing rough country.

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