One of the big system reforms embedded within PPACA is a move towards payments for quality instead of quantity. The Medicare payment structure is changing at the pilot project level. The formation of Accountable Care Organizations (ACOs) are designed to shift some of the risk of high cost care away from the government and other payers and towards the providers. The ACOs are structured so that providers are responsible for population health management and if their patients cost less, they keep a good chunk of the incremental savings over expected expenditures. If they cost significantly more than just random noise or case mix would suggest, the providers are on the hook for the overruns.
Medicare’s ACOs are starting out small, but they seem to be working.
The Washington Post is reporting that the Pioneer ACO program (Pioneer is the more ambitious program) is seeing good results:
The second, smaller group of 23 ACOs are in the Pioneer ACO Model. They have more experience, and the financial incentives are larger. Out of this group, 11 earned bonuses, Medicare announced. Three other ACOs in this Pioneer ACO Model lost money, and three more took advantage of a Medicare option that allows them to delay evaluation until after they have three years of experience.
Roughly half of the ACOs are saving significant money, a quarter are either losing money or seeking safe harbor, and a quarter are bouncing along within the margin of error.
This is a major win, especially since research has shown that the business process changes that produce big cost savings for ACO like organizations take some time. The Pioneer ACOs have been in operation for two years. Business process changes usually take eighteen to twenty four months to propogate through the organization. My bet is that next year’s results from this cohort of Pioneer ACOs will be even better.
As the ACO model spreads throughout healthcare, structural changes will need to be made.