Medicare Pioneer ACO Program Reports a Second Year of Savings

May 4, 2015

U.S. Health and Human Services Secretary Sylvia Burwell announced today that the Medicare Pioneer ACO program saved $344 million in its first two years of operation. That amount equates to roughly $300 in savings for each of the 600,000 beneficiaries receiving services through the participating ACOs. The savings represent another positive milestone for the Pioneer ACO program that pilots a new model of organizing and paying hospitals and physicians for Medicare services to improve quality and control costs.

The Pioneer ACO program is unique for providers because it provides both an opportunity for hospitals and affiliated physicians to share savings and financial risk with the federal government. So, if a Pioneer ACO beats spending targets, it receives a share of the savings. At the same time, if it misses the spending target, it absorbs a share of the losses. This level of risk has caused the number of participating organizations to remain fairly small because the demands and risks are higher in this ACO model. The program started with 32 ACOs in 2012, and that number dropped to 19 in its second year.

While the overall amount of savings dropped from $297.7 to $104.5 million between the first and second years of the program, the continued savings suggest that high-performing ACOs can successfully meet spending and quality targets. With just two years of results to report, however, it remains to be seen if the participating Pioneer ACOs can continue these successes, or if additional ACOs will adopt the model in the coming years.

The Medicare Pioneer ACO program is part of a broader movement of Medicare toward alternative value-based payment models that emphasize quality performance and cost control. HHS plans to implement reforms of this type by moving 30% of Medicare provider payments to alternative payment models by 2016, and increasing that share to 50% by 2018.