(Bloomberg) — Health systems in at least 14 states are joining a new version of the Medicare accountable care organization (ACO) program, which is supposed to give health care providers a financial incentive to hold down the cost of care, after some groups gave up on an earlier effort.
The new ACO program is the latest major effort based on the Patient Protection and Affordable Care Act of 2010 (PPACA) to change the way doctors and hospitals are paid.
In all, 21 systems are taking part in the Next Generation Accountable Care Organization program, which started on Jan. 1, the Centers for Medicare & Medicaid Services (CMS) said Monday. The participating systems, such as Steward Health Care and WakeMed, will cover about 650,000 individuals this year.
CMS, an arm of the U.S. Department of Health and Human Services (HHS), has been trying a series of programs under PPACA to move Medicare away from paying doctors and hospitals a fee for each service provided, and focus instead on the quality and efficiency of the service. But the results have been patchy, with many systems dropping out of the previous version of the ACO program, the Pioneer ACO Program, because they struggled to meet its criteria. Some had to pay penalties.
HHS Secretary Sylvia Mathews Burwell has set a goal of tying 30 percent of Medicare payments to programs like ACOs by the end of this year. By 2018, HHS wants half of Medicare payments to flow through ACOs and other programs that take into account whether beneficiaries are receiving high quality care.
Of the 32 systems that began the five-year Pioneer program, just nine remain for 2016, the program’s final year. Seven of the systems are starting in the Next Generation ACO program this year. The others have exited or moved to other Medicare programs.
Dartmouth-Hitchcock health care system left Pioneer last year after getting a penalty for failing to meet savings benchmarks. And although it believes in the aims of ACOs and was accepted into the Next Generation program, Dartmouth-Hithcock didn’t sign up in the program for this year.
The risk of having to pay another penalty was too high, according to Robert Greene, the system’s executive vice president and chief population health management officer. The system will make a decision on 2017 after seeing the government’s savings expectations, he said in a telephone interview.
One main difference between Pioneer and Next Generation is in how savings are calculated, said Patrick Conway, deputy administrator for innovation and quality at CMS. The programs use different benchmarks and take into account different estimates of how much medical costs should increase in a given year.
Across the United States, most of the 477 Medicare ACOs are eligible for payments from the government if they save money and meet quality standards. Sixty-four of them — including Pioneer and Next Generation — are taking on more risk: They may have to pay the government if it turns out their care is more expensive than expected.
Overall, there are more than 8.9 million Medicare beneficiaries covered in several different kinds of accountable care programs, the Obama administration said Monday. About 37.8 million people are covered by traditional Medicare and another 18.1 million are in Medicare Advantage plans.
Pioneer ACO program participants, including Dartmouth-Hitchcock and Maine’s Beacon Health, have said the program was tougher on health systems that already had relatively low costs.
“To go further, it’s not just [about] cutting fat; we need to make structural changes,” Greene said. “If you take someone running a five-minute mile and try get them to four minutes, not only is there a lot of training and hard work, there just aren’t a lot of places to cut.”
Beacon Health decided to split its Pioneer ACO. Rural hospitals, with about 6,000 patients, are now going to be part of a less stringent program, while other facilities with about 17,000 patients, are entering the Next Generation ACO program, according to Chief Financial Officer Jeff Sanford.
The Next Generation ACO rules give Beacon more flexibility in how it takes care of patients, including provisions for expanded use of home visits and remote visits using technology, or telehealth, Sanford said.
“We like the financial model a lot better than the Pioneer model,” he said. “There’s more flexibility in terms of patient engagement.”
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