ACOs can pay off with time, pilot project indicates

August 24, 2011

Accountable care organizations (ACOs) can be financially rewarding for participating physician groups, but it may take longer than expected, if the results of the physician group practice demonstration apply. Read more to find out when the risks actually resulted in rewards.

Accountable care organizations (ACOs) can be financially rewarding for participating physician groups, but it may take longer than expected, if the results of the physician group practice (PGP) demonstration apply.

In a letter to Centers for Medicare and Medicaid Services (CMS) Administrator Donald Berwick, the 10 organizations that participated in the PGP demonstration said that none of them would participate in ACOs under the rules proposed in March. The sticking point appears to have been the specifics of the rules CMS put out for comment, rather than the concept.

Now, CMS has announced that all 10 will continue to participate in a 2-year transition demonstration of a variant on the proposed ACO model.

As the PGP demonstration was in many ways the foundation of the ACO model outlined in the Patient Protection and Affordable Care Act, the groups’ criticism created concern about the viability of the structure. That all of them chose to continue in the transition program may reassure other practices about the long-term results and rewards of fee for performance.

For CMS and physician groups considering participation in a Medicare ACO, the lesson from the demonstration project is that the financial return on investment in an ACO takes longer than the 3-year contract in the proposed rule.

In the first year of the demonstration, just two groups received performance payments for improvements in quality and cost efficiency. In year two, four groups received payments. Five groups earned savings bonuses in years three and four, and four groups received the incentive bonuses in the final year of the demonstration. Only the Marshfield Clinic in Wisconsin and the University of Michigan Faculty Group Practice earned performance payments in all 5 years.

All of the groups did better on measures of quality. By the end of year five, seven of the groups had achieved all benchmarks on the 32 performance measures and the other three had met benchmarks for 30 measures. At the end of year one, just two groups met all the performance benchmarks. All 10 groups reached the benchmark performance measures for heart failure, coronary artery, and preventive care by the end of the demonstration.

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