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Quality Issues Reduce ACO Financial Awards by $41 Million

Poor performance lowers reward potential

An analysis by consultant Leavitt Partners has found that the $273 million in awards announced in August for 65 Medicare accountable care organizations (ACOs) under the Affordable Care Act has been reduced by $41 million based on quality performance. ACO financial rewards are not tied to any measures in year one, but they are linked to 19 measures in year two and all 33 measures in year three.

As reported by Modern Healthcare, the biggest contributor to a drop of quality ratings was a measure of avoidable initial hospitalizations for patients with congestive heart failure, which accounted for $5.6 million, or about 13% of the total reduction to ACO awards. Another measure of preventable initial hospitalizations—for patients with chronic obstructive pulmonary disease or asthma—dragged down awards by another $3.6 million.

The top financial performers did so poorly that none ranked in the top 90th percentile nationally, said David Muhlestein, senior director of research and development for Leavitt Partners. That was true also for the other roughly 260 ACOs that reported performance on the measure for 2014. With such a large group, more variation in performance would be expected, he said, raising questions about why ACOs uniformly did so poorly. 

ACOs must rank in the top 90th percentile to receive full credit for a measure, which is indicated by 2 or 4 points. Points decrease as ACOs’ performance drops below the 90th percentile. Those that score in the 30th percentile or below get no points. Points are used to calculate an overall score, which Medicare uses to adjust financial awards. 

Jeffery Spight, who oversees Universal American's ACOs, said the performance largely reflected the challenges ACOs faced collecting data and documenting heart failure patients appropriately. The two dozen ACOs under Universal American's joint ventures operate across 340 electronic medical record systems and all but one are made up entirely of physician practices that range from solo operators to multispecialty groups, he said. That presents significant obstacles gathering necessary data to meet Medicare reporting standards. 

Measures of hospital use may also be significantly affected by differences across ACO patients, said Dr. J. Michael McWilliams, an associate professor of health policy at Harvard University who studies the issue. The Centers for Medicare and Medicaid Services makes some effort to adjust performance to reflect the fact that some hospitals and doctors care for sicker patients than others, but that adjustment is limited, he said.

Source: Modern Healthcare, October 16, 2015.

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