A 10th Medicare Pioneer accountable care organization (ACO) is throwing in the towel, following other ACOs that previously left in favor of other Medicare saving opportunities or dropped out of the ACO program altogether. 

Sharp HealthCare, a five-hospital system in San Diego, announced it was leaving the Pioneer ACO program in its third-quarter financial statement. Sharp notified the Centers for Medicare & Medicaid Services (CMS) on June 20.

Sharp’s ACO, which covers 28,000 Medicare beneficiaries, is transitioning those patients to other care-management programs, says Modern Healthcare in a recent article. The limited liability company that encapsulates the ACO will also be dismantled. 

Twenty-two Pioneer ACOs remain from the original 32.

Sharp ACO said its risk for a significant shared loss drove the decision to pull out, and also some regional costs, such as wages, that the ACO had to face, but weren’t accounted for across the national program. 

For 2012 and 2013, Sharp ACO’s performance was under a defined 2% and 1.9% minimum threshold, respectively, so no shared savings payments were earned and no increased cost payments were due.

“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,” Sharp ACO said.

Among those who previously departed from the program are Providers Primecare Medical Network, University of Michigan, Physician Health Partners, Seton Health Alliance, Plus (North Texas Specialty Physicians and Texas Health Resources), HealthCare Partners Nevada ACO, HealthCare Partners California ACO, JSA Care Partners and Presbyterian Healthcare Services.

The latest departure has some industry leaders questioning the program’s long-term sustainability. 

John Gorman, founder of healthcare consulting firm Gorman Health Group, thinks more will drop out, he told Modern Healthcare, adding that he attributes the skepticism to the CMS’ payment benchmarking.

“What’s driving all these health systems nuts is it’s CMS’ own methodology that’s causing them to lose under this demonstration,” Gorman said. “It’s not their lack of performance.”

The CMS’ financial benchmarking model for the Pioneer program is based on national measures and does not incorporate regional payment rates, which negatively impacted Sharp ACO since San Diego’s area wage index increased by 8.2% between 2012 and 2014, said Alison Fleury, CEO of Sharp’s ACO.

The way the Pioneer program calculates Medicare disproportionate-share hospital payments to reflect the financial burden of large numbers of Medicaid patients also hurt Sharp ACO, Fleury said.

Read the full Modern Healthcare article here.

Written by Cassandra Dowell