These Aren’t Mixed Results: Pioneer Accountable Care Organizations Worked

by Mike Miesen

After a slew of disheartening press releases from CMS about the Affordable Care Act’s growing pains, the Obama Administration is probably quite happy to see the initial results of one of the law’s most important provisions: Accountable Care Organizations (ACOs). You should be, too.

But the framing of the results may give the typical reader a false impression of what’s actually transpired. From an article by Melinda Beck in the Wall Street Journal titled “Mixed Results in Health Pilot Plan”:

All of the 32 health systems in the so-called Pioneer Accountable Care Organization program improved patient care on quality measures such as cancer screenings and controlling blood pressure, according to data to be released Tuesday by the Centers for Medicare and Medicaid Services. But only 18 of the 32 managed to lower costs for the Medicare patients they treated—a major goal of the effort. Two hospitals lost money on the program in the first year.

Does that sound mixed to you? Let’s restate it a bit, with two charts for emphasis:

All of the 32 health systems in the so-called Pioneer Accountable Care Organization (PACO) program improved patient care on quality measures such as cancer screenings and controlling blood pressure. 18 (56% of PACOs) managed to lower costs for the Medicare patients they treated, saving $140 million in costs; of that, they’ll receive $76 million, and $33 million will be returned to the Medicare Trust Fund. Only two of the 32 PACOs lost money in the first year.

Or, in charts:



Put that way, it sounds a bit more successful, right?

Partners Healthcare, the Boston-area hospital conglomerate, was one of the winners, and will get a check for $7 million from CMS. Of the two PACOs to lose money, one did so, its executive director said, because its cost baseline was artificially low; it will cut a check to CMS for $2 million. Even so, it isn’t one of the nine that are reported to be leaving the program; it’s sticking around.

Make no mistake: these aren’t mixed results. These are unambiguously positive results for one of the most important provisions in the Affordable Care Act.

Should we have expected all 32 PACOs to save money in the first year of a nascent program? Probably not. And they didn’t; 44% either failed to reduce costs or lost money on the program. But, as the director of CMS’s Innovation Center put it, we shouldn’t have expected all 32 to improve patient care, either: “It’s very rare that 100% of the participants outperform benchmarks.” And they did.

This is only the first year of a program that is reinventing the way the American health care system operates. And it worked. Full stop.

Three-quarters stop, actually: it’s important to keep in mind that the PACOs are, well, weird. For starters, they are Pioneer ACOs because they already had ACO-like qualities, so they have a head start on other hospital systems and are perhaps uniquely qualified to initially succeed. Then there’s the fact that they self-selected into a brand-new program that could cost them millions in missed Medicare reimbursements; their finance departments crunched the numbers and guessed that they could make money (or at least wouldn’t lose money). Most were right. And PACOs operate under slightly different rules than the average ACO will, starting in 2014; for the first two years, for example, PACOs are playing under the old fee-for-service rules, then will move to global payments, and only PACOs have two-sided risk – they can share in savings and losses, while typical Medicare ACOs will only share in savings.

In other words, PACOs aren’t “average” health systems, and they aren’t “average” ACOs; it’s obviously premature to say that all ACOs will work.

Still, that doesn’t invalidate these results, and it doesn’t invalidate the hope that ACOs are one policy innovation that can help bend the cost curve in a real, significant way.

More information is set to be released later today, so we’ll have a better handle on the magnitude of the savings compared to total spend, implementation costs, reporting costs, etc. We’ll link the report here after it’s released.


Mike is a healthcare consultant turned aid worker turned traveler (currently: East Africa) and freelance journalist. Follow him on Twitter @MikeMiesen or subscribe to the blog.


5 thoughts on “These Aren’t Mixed Results: Pioneer Accountable Care Organizations Worked

  1. AK says:

    Can you speak to the difference between Medicare PSOs and ACOs? Does it come down to how the payments are made/set?

    • Mike Miesen says:

      Yeah, and the risk – PACOs share both upside and downside risk (they can – some did – lose money if they cost Medicare more); MSSP ACOs just share upside at first.

      But the most significant differences are in selection. Those that chose to be PACOs are different organizations than those that aren’t PACOs in all kinds of ways that may affect how effective they are at being ACOs.

      No ready-made counterfactual/comparison group makes it tough to say what the causal mechanism of the improvement was, too. Could be the Pioneer program, could be other incentives, etc.

  2. Spencer says:

    The Medicare shared savings programs all required that the hospitals take an immediate discount on all of their Medicare payments. In order for most hospitals, not the ones that already have the operational structures to become an ACO, it will require a large amount of capital to make these programs work. Wouldn’t CMS be wise to push back the Medicare discount at least a year to allow these programs to actually be successfully implemented?

  3. Dr Pullen says:

    This is really a great discssion of both how ACOs have fared so far in Obamacare, and of how the press can twist the facts to create a headline that suits their bias. I agree that these results are incredibly positive, and to say they are mixed results is simply misleading. Great article. Thanks.

  4. Amy Corrado says:

    You read my mind and expressed my thoughts perfectly. When I read the releases I couldn’t believe that they were trying to call those results negative. Thanks so much for the blog!

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