This week Dartmouth-Hitchcock said it is leaving the Pioneer ACO program, after losing more than $3 million in its last performance year. Dr. Robert A. Greene, executive vice president and chief population health management officer for the ACO, told a number of news outlets that it will instead join the Next Generation ACO program when it starts in January.

“We looked at our performance and looked at our [past] performance and loved at the 2015 performance and we saw the same thing, another penalty,” Greene told Healthcare Finance. “It seemed unsustainable from a financial point of view.”

Dartmouth-Hitchcock was approved for the Next Generation ACO at the same time it notified CMS that it was leaving the Pioneer program. The Next Generation ACO adjusts its benchmarks annually, rather than quarterly, like the Pioneer does. 

Our Take: This announcement was shocking news on so many levels, even though the ACO signaled it was having problems months ago. But the most obvious point here is that Dartmouth is (arguably) the birth place of ACOs. The term “Accountable Care Organization” was first used by Dr. Elliott Fisher at a public meeting of the Medicare Payment Advisory Commission to describe what, according to CMS, includes “groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care.”

Fisher and others were instrumental in the demonstration program that preceded the first Pioneers, which Dartmouth-Hitchcock was a part of, and to this day Fisher and Mark McClellan, M.D., Ph.D., are leading proponents of the ACO movement. They are the driving force behind the two major ACO conferences held each year—the ACO Summit and the ACO Congress, which are now in their sixth year. McClellan served as a member of the Council of Economic Advisors and was FDA Commissioner under President George W. Bush. Fisher leads The Dartmouth Institute for Health Policy and Clinical Practice, where one member of the Darwin team attended graduate school.

But this move isn’t about Fisher. It’s about economics. Dartmouth-Hitchcock simply couldn’t meet its aggressive benchmarks and make money in the process. The story is remarkably similar to another high-performing health system, Sharp Healthcare, which left the Pioneer program in its second year because of how much money it would have owed CMS had it remained in the program. According to CMS’ program evaluation completed buy L&M Policy Research, Dartmouth-Hitchcock lost more than $28 million in the first two years of program compared to near market non-ACO Medicare beneficiaries; Sharp lost nearly $32 million over the same time period.

In actual dollars—not amounts calculated by a statistical model—in its second performance year, Dartmouth-Hitchcock owed CMS $1.4 million. In year three, it saved nearly 4% compared to year two and beat its comparison group (other non-ACO participants in New Hampshire) by 1.2%. But the ACO ended the year 0.5% short of its benchmark to earn any savings, which meant paying CMS $3.7 million at the end of the year.

Despite the recent announcement from the Department of Health and Human Services that the Pioneer program would be expanding, Dartmouth-Hitchcock’s departure signals a different direction. As another example, the aforementioned program evaluation showed Beth Israel Deaconess Care Organization (BIDCO) losing $53 million in two years compared to near-market. These are venerable health systems that otherwise score well on any number of quality metrics. But it highlights a problem often talked about in ACO circles, and that is CMS' inability to get the benchmarks right for high-performing organizations. In a way, it favors health systems that are performing comparatively poorly to begin with, so that even basic improvements are rewarded handsomely.

Dr. Greene highlighted this problem using an analogy that the system’s president and CEO, Dr. James Weinstein, says it is like two different runners. It is easy for someone running a 12-minute mile to drop two minutes off their time. But for someone running a 5-minute mile, getting to the 4-minute mark is much more difficult.

Many in the ACO community are looking to the Next Generation ACO to solve this problem, including Dartmouth-Hitchcock.

“We’ll see the benchmark upfront,” Greene said. “It has to be sustainable. We’re cautiously optimistic.”

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