The Centers for Medicare & Medicaid Services (CMS) announced on May 4 that a key pilot program, the Pioneer Accountable Care Organization (ACO) model, saved Medicare $384 million over two years (2012-2013). CMS’s independent Office of the Actuary issued a detailed report.

The Pioneer ACO model is the first alternative-payment model certified by CMS’s Actuary Office to cut costs while improving healthcare quality and is now eligible to be expanded to larger groups of Medicare beneficiaries. The Pioneer ACO program initially encountered mixed success, with 13 of the original 32 participants dropping out of the program or switching to other models after failing to meet performance targets. Only 13 of the remaining 19 Pioneer ACOs qualified to share in the $280 million savings with Medicare the first year; just 11 shared the $104 million savings the second year; and two were required to repay Medicare several million dollars.

However, a new analysis, published in the Journal of the American Medical Association (JAMA), was more encouraging. CMS researchers found that the 600,000 patients in Pioneer ACOs spent, on average, $36 less per month in 2012 and $11 less per month in 2013 than comparable non-affiliated patients. The JAMA analysis also found that Pioneer patients had fewer hospitalizations; used fewer tests, procedures and imaging services; and reported more timely care and better communication with clinicians than the comparison group. 

Some experts say that more options and incentives for health systems will be needed to meet the federal government’s ambitious goals of tying 30% of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as ACOs or bundled payment arrangements, by the end of 2016, and tying 50% of payments to these models by the end of 2018.