What Does Sharp HealthCare’s Pioneer Departure Mean?

What does it mean that Sharp HealthCare has just announced its departure from the Medicare Pioneer accountable care organization (ACO) shared savings program?

As reported online in California Healthline, the San Diego-based integrated health system announced on Tuesday, Aug. 26 that it had dropped out of the Pioneer ACO program.

What’s more, Sharp HealthCare’s departure follows by one year the departure of nine other patient care organizations and collaborative that have withdrawn from the program. In July 2013, nine ACOs out of the original 32 withdrew, including two others in California. According to California Healthline, “The five-hospital system’s ACO, which covers 28,000 Medicare beneficiaries, announced its plan to quit the program in its third-quarter financial statement released Tuesday. The company notified CMS [the federal Centers for Medicare & Medicaid Services] of its decision on June 20.”

The California Healthline story went on to say that “Alison Fleury, CEO of Sharp’s ACO, said the system broken even during the first two years of the program and reduced readmission rates while improving its quality metrics. Sharp also was on track to meet quality benchmarks, and was not at risk of losing its Medicare funding, according to Fleury. She attributed Sharp’s decision to drop out mostly to the financial model of Pioneer ACOs, saying, ‘Because the Pioneer financial model is based on national financial trend factors that are not adjusted for specific conditions that an ACO is facing in a particular region (e.g., San Diego), the model was financially detrimental to Sharp ACO despite favorable underlying utilization and quality performance.’” The article went on to note that San Diego’s area wage index had increased by 8.2 percent between 2012 and 2014, but because the Pioneer model does not take that into account, health systems have not received amplified regional payments.

With regard to that model, I’ve just spoken with a source who is very familiar with the situation, and who has confirmed to me that the concern stated by Alison Fleury was indeed one of the main concerns among Sharp HealthCare leaders. And yes, the devil always is in the details in these arrangements.

So is having 10 of the 32 Pioneer ACOs leave the program (some have left Medicare Shared Savings altogether, while others have moved into the regular MSSP) a major development? Yes and no. On the one hand, virtually all of the organizations and collaboratives that came together to join the Pioneer program were very well-positioned to do so. All had had some or considerable experience in risk-based health plan contracting on the private plan side; and all had participated in value-based purchasing in some form in the recent past. What’s more, some of the names on the list (and none of these have left, to date) are famous as innovative organizations in U.S. healthcare: Fairview Health Systems, Banner Health Network, Allina Health, Park Nicollet Health Services, Partners Healthcare.

As Blair Childs, senior vice president of public affairs at the Charlotte-based Premier Healthcare Alliance, said in a press release back last July, "Dropping from the Pioneer program does not mean that providers are abandoning their investments or wavering on the concept of ACOs. Instead, many are moving from Pioneer to the less risky options in the Medicare Shared Savings Program. Others are not changing to MSSP, in some cases because of the existence of unnecessary regulatory barriers, and are instead applying their ACO investments to private contracts with insurers."

Still, having 10 organizations out of the original 32 has got to sting at CMS. There’s no question about it, this kind of work is very hard. And, in my current reporting on ACOs, I’m finding a full range of situations among the leaders of patient care organizations participating in either the Pioneer or regular MSSP programs, from a complete sense of confidence, to, in some cases, real concern. “Making the numbers” has been, is, and will continue to be, difficult.

Perhaps some of the ten whose leaders have pulled their organizations out of the Pioneer program were a bit over-confident in what they could achieve under the circumstances. Whatever the case, learnings are actively taking place now, learnings that will benefit not only the participating organizations, but all U.S. healthcare organizations (and potentially even patient care organizations beyond our borders). Whatever the case, learnings are taking place. And in the next few years, those learnings will become robust enough to provide the U.S. healthcare system with real insights into how to make not only the Pioneer MSSP program work, but more broadly also how to move forward confidently and prepared into the new healthcare. I look forward to the sharing of insights that will make this all work for everyone, for real.