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Flaws in Pioneer ACO Prompted Dartmouth-Hitchcock Exit

By Kyle Murphy, PhD

- Flaws in assessing the performance of advanced accountable care organizations (ACOs) as part of the Pioneer ACO Model are responsible for the exit of Dartmouth-Hitchcock Health System from the Centers for Medicare & Medicaid Services (CMS) program.

Dartmouth-Hitchcock is no longer a Pioneer ACO

Representatives from the New England health system, including President and CEO James N. Weinstein, have revealed the circumstances that led to the decision last month to halt participation in the program limited to organizations experienced in accountable care or similar risk-based models in a Health Affairs blog post.

"DH did not make the decision to leave the Pioneer program lightly," write Weinstein et al. "A leader in the adoption and application of ACO principles, DH is committed to pursuing high value population-based care through continuous quality improvement and a relentless focus on cutting waste from health care delivery by engaging providers and payers, waste that is perhaps more difficult to identify and reduce from within a very low-cost environment."

According to Dartmouth-Hitchcock, flaws in the Pioneer ACO model's risk-adjustment methodology, target benchmarking, and incentive distribution were the leading factors.

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With its decision in September 2015, Dartmouth-Hitchcock now numbers among 13 former Pioneer ACOs, many of which left back in 2013 for either the Medicare Shared Savings Program or a complete exit from CMS ACO programs.

As organization with the nearly thirty years of experience with population health management, Dartmouth-Hitchcock should have been an ideal fit for the Pioneer ACO Model. As things actually turned out, the health system was made to look like an under-performer based on factors outside of its control.

After earning $1 million in shared savings incentives in the first year of the program, Dartmouth-Hitchcock followed up that performance with consecutive shared loss repayments of $1.4 million and $3.6 in 2013 and 2014, respectively.

According to Weinstein et al., those figures do not accurately reflect that success Dartmouth-Hitchcock had in saving CMS money:

Despite already having the sixth lowest per capita expenditures in the Pioneer program (among the 19 ACOS remaining in the program), DH continued to save CMS substantial money in 2014: for approximately 41,000 attributed patients, DH reduced annual per-capita expenditures by 3.9 percent, generating a cost savings of about $16.0 million while maintaining high quality care. While DH provided care at a lower cost than that of the reference population, care costs were higher than the target set by CMS, hence the penalty.

Providing care in a low-cost environment doomed Dartmouth-Hitchcock's participation in the Pioneer ACO Model.

Impetus for an exit

It wasn't for a want of trying that Dartmouth-Hitchcock produced these "poor" results. Weinstein et al. point to three flaws in the CMS program's approach to accountable care.

First, the Pioneer ACO Model does not account for variation in utilization, opting instead in favor of reference population for establishing a baseline to measure participating ACOs against. Holding that high utilization areas have higher utilization and low utilization have lower utilization, the program had no room for adjusting for illness burden, representatives from the health system claim.

"While the fourth year of the program will use a different process, Medicare should incorporate measures of visit intensity or poverty measures into illness burden estimates so that baseline performance of low-utilizing regions will not be biased and better adjustment for illness burdens and expected future service utilization across high- and low-utilizing areas can be made High-utilizing areas should not be rewarded a second time for generating higher risk scores," they recommend.

Another factor in motivating Dartmouth-Hitchcock to stop being a Pioneer ACO was how CMS calculated the target benchmark for gauging financial performance:

After defining the reference population, a target benchmark was calculated by first adding to baseline actual expenditure 50 percent of the absolute dollar difference between ACO-specific baseline expenditures on the reference population and the ACO-specific actual performance year expenditures. To that was added 50 percent of the product of the ACO-specific baseline expenditure and the percentage change between the ACO-specific baseline reference expenditure and the ACO-specific performance year expenditure.

According to Weinstein et al., Pioneer ACOs could neither asses their performance in real time because the final target measure was not generated until the performance was complete nor account for the effect utilization changes in other geographies on the target.

"The relative slowdown of cost growth in the US during this time period allowed organizations that had a history of providing excess care to generate a higher percentage of cost savings while concurrently generating unachievable targets for ACOs that operate in historically low-cost environments," they argue.

Lastly, the Pioneer ACO Model is not a good fit for participants with already low costs and little excess to shed. "Just as performance ceilings limit improvement gains, cost floors—spawned by medicine’s high costs of labor, technology, and compliance—make cost reductions difficult when they are already low," Weinstein et al. add.

While Dartmouth-Hitchcock will no longer partake in the CMS program, it has volunteered numerous recommendations that together emphasize the need for greater flexibility in assessing the merits of individual Pioneer ACOs and the group as a whole.

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