Ken Perez

“The report of my death was an exaggeration.”
—Mark Twain

In late August, Sharp HealthCare, a five-hospital system in San Diego, Calif., dropped out of the Medicare Pioneer Accountable Care Organization (ACO) program. About a month later, three more hospital systems—Franciscan Alliance in central Indiana, Genesys PHO in Flint, Mich., and Renaissance Health Network in Pennsylvania—announced their departures from the program.

Reflecting our momentum-oriented culture, in which we tend to jump on and off bandwagons quickly, ACO naysayers were quick to characterize the four departures as empirical evidence of the flaws not only of the Pioneer model, but also of the ACO concept in general. Although the former characterization certainly has some truth to it, the latter is definitely a bridge too far.

First, two of the four departing systems—Franciscan Alliance and Genesys PHO—are applying to enter the less-challenging Medicare Shared Savings Program (MSSP), so they have not given up on the concept of accountable care. Furthermore, a majority of the 13 Pioneer ACOs that have left the program have transferred to the MSSP.

Second, change is in the air for Medicare’s ACO programs. In December 2013, CMS’s Innovation Center issued a request for information that solicited input on the Pioneer ACO model as well as new ACO models. On June 26, 2014, CMS sent the White House Office of Management and Budget a proposed rule for the second round of the MSSP with changes that would apply to existing ACOs and approved ACO applicants participating in the program starting on Jan. 1, 2016. We are expecting word any day now from CMS on its revisions to the two programs.

Third, although the details on the program changes are not known, it is clear that ACOs are important to health reform, because they embody more cost-reduction potential than any of the other fee-for-value healthcare delivery reforms of the Affordable Care Act (ACA). Thus, as Sean Cavanaugh, deputy director of the Innovation Center, told attendees at the National Accountable Care Organization Summit in June, one of CMS’s primary goals is to “retain and increase the number of ACOs operating in the program.” So CMS will likely retool its ACO programs to be on balance more favorable for participating provider organizations.

Fourth, although the four recent departures unquestionably struck a blow to the Pioneer ACO program, bear in mind that the total number of Medicare ACOs has grown steadily over the past four years to over 360 today, and for those that have reported financial results, almost half have been able to hold expenditures below projections. Furthermore, more than 20 states have launched Medicaid ACOs, with Colorado and Utah reporting some impressive utilization decreases and financial results.

And fifth, let us not forget the estimated 300 to 350 commercial ACOs, most of which are being orchestrated by the nation’s largest health plans, including Aetna, various Blue Cross Blue Shield plans (especially Wellpoint, soon to known as Anthem), Cigna, Humana, and UnitedHealthcare. It’s clear that they will continue to grow in both quantity and variety.

The recent departures from the Pioneer program have definitely highlighted some of the shortcomings of that model, and ACOs admittedly remain a work in progress. But the general tide—across the hundreds of Medicare, Medicaid, and commercial ACOs—indicates that accountable care, with needed refinements, will continue to grow in its influence and impact.


Ken Perez is vice president of healthcare policy, Omnicell, Inc., Mountain View, Calif., and a member of HFMA’s Northern California Chapter.

Publication Date: Friday, October 03, 2014