Client Briefing: A Year of the Pioneers

The Centers for Medicare and Medicaid Services recently reported the first-year results of its Pioneer ACO initiative.

Thirteen of the 32 Pioneer ACOs met their savings targets and received $76 million in shared savings payments from CMS, the agency stated. Another 17 saved money, though not enough to qualify for shared savings. Two lost money. Are those good numbers or bad? Is Pioneer ACO succeeding or failing? In this client briefing, two of Oliver Wyman’s most experienced ACO builders interpret CMS’s report in light of what ACO Pioneer aims to accomplish — and their own understanding of the life cycle of the ACO.

The Path to Value: A Balancing Act

Can value-based care really solve the U.S. healthcare crisis? We believe so, but the path to value requires a careful transition in both care delivery and provider reimbursement. If healthcare providers take on too much financial risk and are unable to balance it with improved quality of care and better outcomes, they will suffer financially. (That is more or less what happened to the HMOs of the 1990s.) On the other hand, if they transform themselves clinically and don’t take on risk-based arrangements, the financial benefit of transformation will all go to payers — much to the detriment of the providers.

Pathway to Value Transformation

Source: Oliver Wyman

1Why do you suggest that people not pay too much attention to the Pioneer ACO numbers on costs?

Probably the most important reason is that accountable care organizations take more than a year or two to have a big impact on costs. That makes sense: For example, one ACO strategy to keep patients healthier and out of the hospital is to get them to be more compliant in taking prescription drugs — statins, blood pressure medications, and so forth. That can deliver substantial savings, but you won’t see them for a few years.
2Don’t the numbers at least show which Pioneer ACOs did well and which didn’t?

Not really. ACOs typically save money in stages. The early savings — the low-hanging fruit — come easy, but they don’t amount to all that much. The later stages can produce dramatic improvements in both costs and quality, but they require some real sophistication and effort. The Pioneer ACOs were (and still are) at a variety of stages, though the overall results show that on the whole they’re still mostly on the early side.
3Does it trouble you that several Pioneer ACOs dropped out of the program?

Again, not really. Pioneer is an aggressive, challenging program. It puts ACOs directly into risk sharing and aims to get them to full risk within three years. That pace is too quick for a lot of ACOs. And there are alternatives, even within CMS, that might be a better fit for them. As we see it, the point of Pioneer isn’t the number of ACOs that stay the course or the number of patients covered; it’s the quality of the models the survivors develop.
4Why is that?

We talk so much about ACOs we tend to forget how little experience anyone has with them. We fall into thinking about Pioneer as if it’s mostly an implementation of the ACO model when really it’s about discovering a working, practical ACO model. This isn’t a check-the-boxes exercise. It’s more: “Take our vague but promising idea for a rocket ship, build one, and fly it to the moon.” We’ll see some crashes, but we really need that rocket. We’ll likely see different forms emerge over the next few years, followed by cycles of innovation and convergence.