By Dan Calabrese ——Bio and Archives--October 20, 2014
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ACOs were supposed to be a new paradigm for health care, with hospitals, primary care physicians and specialists working in teams to be more efficient and coordinate patient treatment across providers. In 2011 HHS introduced this business model as a new federal regulation, so providers that reduce spending according to a formula are paid a bonus that is a portion of the savings. If participants boost spending over this benchmark, they pay a penalty. The Medicare “Pioneer” ACO project originally featured 32 experienced health systems hand-selected by HHS because they had already made progress toward the ACO model. Thirteen—or one-third of the program—have since dropped out as they spent more than the old status quo. In year one, spending increased at 14 sites and only 13 of the 32 qualified for a bonus. In year two, spending increased at six of the remaining 23 and 11 received a bonus. Spending did fall somewhat overall, driven by a few high-performance successes. After netting out the bonuses and penalties, the Pioneer ACOs saved taxpayers a grand total of $17.89 million in 2012 and $43.36 million in 2013. All in, per capita spending was a mere 0.45% lower compared to ordinary fee for service Medicare. Yet the upfront start-up investments for the pioneers (in administration, compliance and information technology) ran to $64 million, so at best the program is a wash. More to the point, the Medicare budget for 2013 was about $583 billion and these are supposed to be the most experienced providers. If most of them can’t succeed, what about the community hospitals that need the most improvement?
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