Hospitals Threaten ObamaCare Savings By Exiting Program

Almost a third of 32 hospitals and health systems involved in an experiment aimed at changing the way medical providers are paid may exit the program, a potential threat to the Affordable Care Act’s ambitious cost-saving goals.

Medicare’s “Pioneer” program is designed to save money by more efficiently managing care for patients with chronic diseases, such as diabetes and dementia. The providers agreed to a three-year plan to forgo traditional fee-for-service payments, where hospitals charge for every procedure, and instead get a fixed monthly stipend for individual patients.

Begun in January 2012, Pioneer is one of several programs involving 252 providers created under the law to experiment with new payment models. Nine Pioneer members have told the U.S. they may exit, said Brian Cook, a Centers for Medicare and Medicaid Services spokesman. At least four may join other accountable-care programs that carry less financial risk, he said.

Depending on the number of patients involved, “it really shows a critical cost-containment approach in the Affordable Care Act is running into real problems,” said Robert Blendon, a health-policy professor at Harvard University’s School of Public Health, in a telephone interview today.

The experimental programs were set up under the law to save Medicare, the U.S. insurer for the elderly and disabled, as much as $940 million through 2015. Hospitals were projected to gain as much as $1.9 billion in bonus payments under the law.

Shifting Models

“We fully anticipated that as these programs get up and running, some groups would shift between models,” Cook said in an e-mailed response to questions yesterday. He wouldn’t identify the participants who may leave Pioneer.

Obama administration officials view the experiments as being among the health-care law’s most promising attempts to slow the growth of health costs.

The Pioneer program was set up for large hospitals and health systems that already had some experience coordinating care for patients, such as Partners Healthcare in Boston, Presbyterian Healthcare Services in Albuquerque, New Mexico, and Heritage Provider Network in Northridge, California.

Blendon said that some of the health systems may be discovering that it is harder to manage financial risk of sick patients than they anticipated.

Financial Implications

Providers think “they can obviously sort of improve the way average care is delivered,” Blendon said. “They don’t realize “there can be some very expensive, difficult situations, or that they may have groups of patients moving around they don’t have the clinical control over they thought they’d have. This can have very serious financial implications for them.”

Presbyterian Chief Executive Officer Jim Hinton, who is also the chairman-elect of the American Hospital Association, warned of potential problems in the Pioneer program in an April 30 interview.

Participating hospitals are responsible for controlling costs for a population of Medicare patients assigned to them, but their ability to manage the patients’ care is limited, Hinton said. For example, they can’t forbid the patients from seeing doctors or other health providers who aren’t part of the Pioneer system.

Also, Medicare has lagged, by about six months, in providing the Pioneer systems medical claims data they need to track spending on their assigned patients, according to Hinton.

‘Feel the Pain’

Medicare officials “acutely feel the pain of providing data on this population on such a broad scale with systems that really weren’t set up to do what we’re asking them to do,” Hinton said then. “We’re asking for more agility than the system is really set up to produce.”

A spokeswoman for Presbyterian, Kristen Krebs, would not say directly whether the hospital system is among Pioneer participants that may drop out of the program.

“We’re still evaluating our options,” she said in an e-mail last night.

Modern Healthcare, a magazine that covers the hospital industry, first reported that the health systems may leave the Pioneer program.

To contact the reporter on this story: Alex Wayne in Washington at

To contact the editor responsible for this story: Reg Gale at