CMS Releases Information on Success of Shared Savings Programs: Early Results Mixed and Inconclusive

05 February 2014 Publication
Authors: C. Frederick Geilfuss II Lawrence W. Vernaglia

Legal News Alert: Health Care

On January 30, 2014, CMS released results on the Medicare Shared Savings Program (“MSSP”) and the Pioneer Accountable Care Organization Program (“Pioneer ACO Program”) for 2012, the initial performance year of each program. The press release issued by CMS reported that the total savings to the Medicare program from the MSSP and Pioneer ACO Program exceeded $380 million in 2012.

In its press release and accompanying official blog post, CMS expressed the view that the results show the programs involving Accountable Care Organizations (“ACOs”) were off to a “strong start” in “achieving significant savings and quality improvements.” The press release quoted U.S. Health and Human Services Secretary Kathleen Sebelius, as saying “These innovative programs are showing encouraging initial results, while providing valuable lessons as we strive to improve our nation’s health care delivery systems. Today’s findings demonstrate that organizations of various sizes and structures across the country are working with their physicians and engaging with patients to better coordinate and deliver high quality care while reducing expenditure growth.”

An analysis of the information released suggests the results are mixed and no conclusion may be drawn based on these initial year’s results as to whether the programs will ultimately be successful.

Background and Reported Results

A. Background. While much of the focus on the Affordable Care Act (“ACA”) has been on access to health insurance through such measures as the individual mandate and the health care exchanges, the ACA also introduced programs designed to reduce health care costs for taxpayers while achieving better quality care. ACOs, through the MSSP and the Pioneer ACO program, were designed as important tools to help re-shape the health care delivery and reimbursement systems.

The MSSP and Pioneer ACO Program both commenced in 2012. Both programs were designed to reward participants with a share of savings in Medicare costs from the Medicare beneficiaries attributed to a particular ACO as measured against a per capita expenditure benchmark. Pioneer ACO participants were required to take downside risk, in that they were obligated to re-pay CMS if their performance was sufficiently worse than the benchmark; MSSP ACO participants were not required to take downside risk, but could elect to do so.

Thirty-two organizations enrolled to commence operation in 2012 in the Pioneer ACO Program, a program designed for organizations which viewed themselves as further along in care coordination. There has been no additional enrollment in the Pioneer ACO program and, in fact, nine (9) of the original Pioneer organizations have withdrawn from participation.

The MSSP is the larger program. One hundred fourteen (114) ACOs enrolled in the MSSP for commencement on January 1, 2012. The MSSP has grown to where there are now 360 ACOs participating in the MSSP, serving approximately 5.3 million beneficiaries. ACOs enroll in the MSSP for an initial three-year term; if they renew they must agree also to share in downside performance if Medicare reimbursement sufficiently exceeds the established expenditure benchmark.

B. Reported Results. Pioneer ACO Program. In July of 2013, CMS had reported that of the initial 32 Pioneer ACOs, 13 (or 40%) had earned the right to receive a share of the savings generated, while only two (2) Pioneer ACOs had been obligated to repay the government for failing to achieve adequate reduction in costs to the Medicare program. On January 30, 2014, CMS issued results from an independent evaluation of the initial year’s results of the Pioneer ACO Program.

The independent evaluation showed that the 23 Pioneer ACOs remaining in the program had generated $147 million of gross savings in Medicare expenditures. CMS reports nine of these 23 ACOs had significantly lowered spending growth while exceeding quality reporting requirements.

MSSP. The released results concerning the MSSP are the first report on performance under the MSSP. The CMS press release indicated that of the 114 ACOs participating in the MSSP throughout 2012, 54 (or approximately 48%) beat their expenditure benchmarks, suggesting that 60 did not. Of the 114 participating ACOs, 25.4% or 29 ACOs earned the right to share in savings by sufficiently beating their expenditure benchmarks and reporting on their performance in meeting quality standards. $126 million of such savings were paid out to these 29 ACOs. Eighty five ACOs (nearly 75% of those participating) did not earn the right to share in any savings.

Analysis of Results

It is difficult to assess the success of either the Pioneer ACO Program or the MSSP based on the results reported for the first performance year. While only 40% of ACOs originally participating in the Pioneer ACO Program and 25.4% of the ACOs participating in the MSSP were entitled to a payment of shared savings, as CMS reported, “a great majority of the program’s overall net input was projected to phase-in over the program’s ensuing performance years.” In the initial year, the providers who participated faced a challenge in changing their mind-set from providing care based on volume to a system where efficient care is rewarded. This challenge was likely exacerbated by the fact that participating providers are reimbursed under two different systems — (1) the shared savings model of the MSSP and Pioneer ACO Program and (2) solely on a fee-for-service basis for non-attributed individuals, with the predominant method being the fee-for-service model, which pays more for more procedures performed. Where the reimbursement method is different based on the patient involved, practice patterns may be hard to modify. Over time, while providers may adjust to this mind set, an additional challenge is that those who succeed initially by reducing their Medicare costs will face lowered expenditure benchmarks in future years, reflecting their initial success. A key issue in the second and subsequent years will be whether participants will be able to continue to reduce costs below these lowered benchmarks.

In the MSSP in the initial year, achieving quality measures did not affect the ability to earn shared savings. In the first year, ACOs received credit for achieving the full quality criteria by merely reporting on the various quality measures. No actual improvement in the quality of care was required to receive a share of savings in the first performance year. Therefore, the impact on quality, and whether savings will be paid when the savings depend on the quality of care are not reflected in the initial results.

The early results discussed above are from CMS’ perspective; they do not reflect the providers’ perspective on the financial or clinical value of their participation. The results do not show, for example, whether participating providers received a positive overall or net financial return on their participation. For example, they do not report on what initial costs any of an ACO’s participating providers in either program incurred to prepare for participation or whether they lost fee-for-service Medicare revenue that offset or exceeded any shared savings paid. The fact that most participants did not receive any shared savings as a result of their participation suggests that participation likely had a negative net financial return for many providers.

It is true that many providers entered into one of these Medicare ACO programs for reasons other than to achieve a first-year reimbursement benefit. Some providers elected to participate to prepare for the anticipated transition to a reimbursement system that rewards efficiency and care coordination. Others who enrolled in these Medicare programs are also participating in commercial market ACOs. Finally, some health systems viewed the ACO as an important approach to becoming population health organizations, which was consistent with their charitable or corporate missions regardless of the financial benefits during the early years of participation. None of these values are captured by either the results or an assessment of whether any participating provider had a positive financial return from participation.


In sum, the early results reported by CMS are inconclusive and mixed. The fact that nearly half of the ACOs were able to demonstrate a cost savings to the Medicare program in the first year certainly is encouraging. Thus, from the perspective of CMS in managing the Medicare budget, there were initial programmatic savings for taxpayers. At the same time, a majority of participants were not entitled to share in any savings, and the results do not provide much of a barometer as to whether providers will find the MSSP or Pioneer ACO Program to be successful long-term programs worth their continued participation.

Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and colleagues. If you have any questions about this Alert or would like to discuss the topic further, please contact your Foley attorney or the following:

C. Frederick Geilfuss II
Milwaukee, Wisconsin

Lawrence W. Vernaglia
Boston, Massachusetts

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