Report Provides Early Snapshot of Pioneer ACOs, Medicare Spending

February 12, 2014 04:42 pm News Staff

Accountable care organizations (ACOs) burst onto the health care scene in a big way in 2011 when CMS' Center for Medicare and Medicaid Innovation launched several ACO pilot projects, including the Pioneer ACO model(, and now the agency is ready to release some results from those projects.

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ACOs are a network of health care professionals and organizations that band together to provide health care services for a defined population of patients. The network is paid to provide coordinated, comprehensive care to patients and assumes responsibility for the cost and quality of that care. The Pioneer ACO model was tailored specifically for health care professionals and organizations already experienced in coordinating care for patients across settings and presumably prepared to take on great financial risk.

Fast forward to 2014, and CMS' recent release of an independently commissioned research report( that summarizes the effects 32 Pioneer ACOs had on Medicare spending during the first year (2011-2012) of the pilot. "Effect of Pioneer ACOs on Medicare Spending in the First Year" presents preliminary data that are intended to serve as an early snapshot of the effect of Pioneer ACOs.

Story highlights
  • A new research report provides an early snapshot of the effect that Pioneer Accountable Care Organizations can have on Medicare spending.
  • Researchers examined 32 Pioneer ACOs and found that in their first year, the ACOs generated gross Medicare savings of nearly $148 million even as they continued to deliver high quality care.
  • In particular, lower spending growth for outpatient and physician services translated into an average savings of $3.10 and $2.34 per beneficiary per month.

Researchers compared the growth rate in Medicare spending for beneficiaries aligned with a Pioneer ACO to two comparison groups: fee-for-service (FFS) patients not assigned to a Medicare ACO in a particular Pioneer ACO's local market and FFS Medicare patients in a similar market where Medicare ACOs were not present.

According to a Jan. 30 press release from CMS(, "Pioneer ACOs generated gross savings of (nearly) $147 million in their first year while continuing to deliver high-quality care."

Furthermore, Medicare beneficiaries aligned with Pioneer ACOs had lower growth in total Medicare spending per person than the local market FFS comparison group. "On average, spending was approximately $20 less per beneficiary per month than it would have been had those beneficiaries not been aligned with a Pioneer ACO," wrote the researchers.

Study Highlights

A peek inside the statistical belly of the report provides some significant findings. For example, authors noted that the results differed across individual ACOs. They found that 23 of the 32 Pioneer ACOs did not differ significantly in total Medicare spending compared to their local FFS comparison markets.

However, eight Pioneer ACOs had significantly lower growth in total Medicare spending per patient -- from about $33 to $102 per-patient, per-month lower -- than the market comparison groups. Researchers determined that the lower growth from those eight ACOs translated to a preliminary estimated savings of $155.4 million to the Medicare program in the first year.

However, those positive savings were offset by one Pioneer ACO that showed significantly higher spending growth estimated to cost the Medicare program $8.5 million more than if the beneficiaries had received equivalent care in their local market.

"Given the variation in their geographies, markets, organizational structures, size and other characteristics, results for these eight Pioneer ACOs in the first year may suggest that ACOs can achieve lower spending growth under a range of market conditions and organizational structures," wrote the authors.

Researchers found that Pioneer ACOs could be slowing spending growth for certain Medicare services. For example, lower spending growth for outpatient and physician services translated into an average savings of $3.10 and $2.34 per beneficiary, per month respectively for those two services.

On the other hand, "Pioneer ACO-aligned beneficiaries had higher average spending growth for skilled nursing facility services and home health services," reported the authors.

Breaking Down Inpatient, Outpatient Spending

Regarding the slowdown in spending growth for outpatient and physician services, researchers wrote, "These services may be more readily affected by care management and provider decisions about the site of service than inpatient services, making it comparatively easier to realize reduced spending growth in the first year."

Researchers also noted that for 15 of the Pioneer ACOs, Medicare outpatient spending grew at a slower rate, ranging from $4 to $27 per-beneficiary, per-month less, than for the local market comparisons.

Authors pointed out that between 2006 and 2011, Medicare outpatient spending outpaced inpatient spending an average of 8.3 percent versus 1.7 percent respectively, a situation explained in part by the fact that some services, according to the Medicare Payment Advisory Commission, were moved from physician offices "to an office that is deemed part of a hospital's outpatient department."

Typically services cost more in the later setting, but "ACOs may be reversing this recent trend of growth in outpatient utilization in favor of settings with lower costs for equivalent services," said the authors. They suggested that the incentive structure of the ACO model -- that lure of shared savings -- could be driving the trend.

Next Steps

Researchers said they intend to follow the key drivers for ACO success and progress. They noted that in the future they will explore the

  • extent of system integration and the level of cooperation between an ACO and hospitals or hospital systems,
  • ability to identify and monitor patients through the "continuum of care,"
  • capacity to encourage physicians and other health care professionals to deliver high-quality care while maintaining a cost-conscious attitude,
  • level of leadership and organizational culture of ACOs, and
  • effect of demand-side pressures from other purchasers for ACO-like care delivery.

The authors concluded that many Pioneer ACOs had not yet fully optimized their relationships with their many partners and were in fact "systems in transition." They called for further research to discern which market features and specific ACO activities "affect Medicare spending and other outcomes for beneficiaries aligned with Pioneer ACOs."