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Hospitals Withdraw From Key Obamacare Cost Savings Plan

Nine of 32 hospitals and health systems dropped out of a U.S. pilot program created through the Affordable Care Act to reduce medical costs by moving away from a traditional fee-for-services model, the government said.

The costs of caring for those enrolled in the “Pioneer” program increased 0.3 percent in 2012, less than half the rate of other beneficiaries in Medicare, the Centers for Medicare and Medicaid Services said today in a statement. Medicare, the U.S. health plan for the elderly and disabled, saved $33 million for the 669,000 beneficiaries in the pilot group, the agency said.

The program, begun in January 2012, created accountable care organizations, or ACOs, designed to save money by more efficiently managing care for patients with chronic diseases like diabetes or dementia. The health providers are paid a fixed monthly stipend for patients rather than receiving fees for medical services.

“We remain firmly committed to the concept of improving health care and containing cost growth via the population health model that drives all ACOs,” said David Spahlinger, executive director of the University of Michigan Medical School’s Faculty Group Practice, one of the nine providers dropping from Pioneer.

The nine medical providers had told Medicare officials they might leave the three-year program early, Bloomberg News reported last month. Seven of the health providers, including the University of Michigan practice, said they will apply for a lower-risk Medicare cost-savings plan. None produced savings in the Pioneer plan.

Projected Savings

The experimental programs were set up by the 2010 Affordable Care Act to save Medicare as much as $940 million through 2015. Hospitals and other participating groups were expected to receive as much as $1.9 billion in bonus payments.

Thirteen of the 32 Pioneers produced shared savings with the agency in 2012 while two had shared losses of about $4 million, CMS said in its statement.

The Pioneer system is “extremely ambitious, even for the most advanced health systems” from a provider point of view, said Blair Childs, a spokesman for Premier Healthcare Alliance, a 2,800-hospital group based in Charlotte, North Carolina, that operates the largest and oldest accountable care organization.

“Dropping from the Pioneer program does not mean that providers are abandoning their investments or wavering on the concept of ACOs,” Childs said in a statement. Seven of the remaining Pioneer health systems have hospitals that are members of the Premier alliance.

All 32 providers performed better than published rates in fee-for-service Medicare for all 15 clinical quality measures for which comparable data are available, the agency said. Twenty-five of the 32 programs produced lower readmission rates than the benchmark rate for other Medicare providers.

“These results show that successful Pioneer ACOs have reduced costs for Medicare and improved the quality of care for their patients,” said CMS Administrator Marilyn Tavenner.

To contact the reporter on this story: Samuel Adams in New York at sadams69@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net

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