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Many healthcare groups drop U.S. Medicare cost pilot program

(Reuters) - About 20 percent of healthcare systems in a Medicare pilot program aimed at holding the line on costs by shifting incentives away from costly procedures have decided to withdraw from the program after failing to produce savings, the government said on Tuesday.

The withdrawals involve seven of 32 provider groups that signed up for the Pioneer Accountable Care Organizations (ACOs) program sponsored by the Department of Health and Human Services (HHS) under President Barack Obama's healthcare law.

After completing the program's first year, HHS said the ACOs have decided to apply to join a different Medicare cost-savings program. Another two decided to leave the program altogether, bringing the dropout rate to more than 28 percent.

ACOs, new business models for provider groups, are seen as vehicles for moving the Medicare program for the elderly and disabled away from a costly fee for service structure. But the Pioneer ACO program's first year appeared to underscore the difficulty of producing savings, despite improving quality through greater care coordination.

The administration said in a statement that the program's 32 ACOs, which served 670,000 Medicare beneficiaries, managed to restrain cost growth to 0.3 percent overall, less than half the 0.8 percent growth for similar beneficiaries not served by ACOs.

ACOs focus on cost-savings and quality care instead of costly procedures and the healthcare law allows experiments to identify the most effective structure. Policymakers see the ACO model as a possible way of containing healthcare spending across the board.

But only 18 of the 32 pioneer ACOs produced savings, including 13 that saved enough to split a total of $88 million with Medicare. Fourteen others generated losses, including two that produced $4 million in losses large enough to be shared with the federal healthcare program for the elderly and disabled.

"This is a very significant transformation for organizations to undertake and it is hard," said Jordan Battani, a managing director of CSC Global Healthcare Group.

"It's hard to do what they are trying to do. All of them have been able to demonstrate quality and outcomes success. And most were able to demonstrate some improvement in the cost structure. Some saw a lot of improvement. A few did not meet the cost target."

CMS said the Pioneer ACOs performed better overall than the published rates for fee-for-service Medicare on 15 clinical quality measures. All 32 ACOs earned incentive payments for their accomplishments.

Twenty-five of the 32 ACOs generated lower risk-adjusted hospital readmission rates. The ACOs also were better at helping patients control blood pressure and cholesterol than fee-for-service Medicare, CMS said.

"These results show that successful Pioneer ACOs have reduced costs for Medicare and improved the quality of care for their patients," said Marilyn Tavenner, administrator of the Centers for Medicare and Medicaid Services, the HHS agency that oversees the Pioneer ACO program.

(Reporting by David Morgan and Susan Kelly. Editing by Andre Grenon)

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