Capital Structure - Pioneer Aco Model

Pioneer ACO Model

In 2002, the Centers for Medicare and Medicaid Services (CMS) launched

 the Pioneer ACO Model. This was authorized and funded by the Affordable Care Act. The Pioneer ACO Model was designed for healthcare organizations that had been working on coordinated care patients of over past several years. All participants had significant previous exposure with coordinated care  across several health care settings. The goal of the Pioneer ACO Model was to rapidly move from a shared savings model to a population based payment model in year three of this CMS experiment.

 Originally 32 pioneer ACO’s made up the original cohort. By the end of the second year of the Pioneer ACO Model, over half of the organizations had dropped out (13)  or had elected to defer reconciliation (3) to the end of the year. As of December 31, 2016 only 9 ACO’s out of the original 32 we’re still part of participating in the Pioneer ACO Model. One of the nine remaining Pioneer ACOs that showed significant success is Banner Health Network.

 Banner Health Network

 The Banner Health Network (BHN) is made up of more than 2,600 Banner affiliated physicians, multiple acute care hospitals as well as several other associated healthcare facilities. In 2015, BHN generated more than $ 35.1 million in shared savings for Medicare over the expected financial benchmark that was set up by CMS and based on expected costs associated with the Medicare fee-for-service program. Because of the shared savings of $ 35.1 M BHN earned more than $24 million in shared savings and bonuses from Medicare. Since the inception of the Pioneer ACO Model, BHN has been the top financial performer for 4 years in a row.

BHN is a not-for-profit healthcare system based in Phoenix Arizona. BHN operates 23 hospitals and several specialized health care facilities. It is the largest employer in Arizona with over 39,000 employees in Arizona alone. BHN operates facilities in seven states.

In 2015, BHN had total revenues of $ 6,791,132,000,  net patient revenues of $ 5,973,945,000  and operating income of $ 104,555,000 (Banner Health Networks, 2015)

The BHN Pioneer ACO Model specifically includes BHN affiliated physicians, 13 (12 of which are in the Phoenix metropolitan area) of the 23 BHN hospitals  and several other healthcare facilities located in Arizona. In 2015, BHN Pioneer ACO had 59,298 Medicare Beneficiaries included in their final reconciliation (CMS.gov, 2015).

Banner Health Networks reports earnings from the Pioneer ACO Model as follows:

• Performance Year 1 (2012):         $13,369,201
• Performance Year 2 (2013):         $9,038,408
• Performance Year 3 (2014):         $18,698,004
• Performance Year 4( 2015) :        $24,578,369

The success of the BHN Pioneer ACO Model is multifactorial. Likely the  biggest factor is lthat Arizona has a relatively high cost per Medicare enrollee of $ 9395. This allows BHN to have a significant amount of low hanging fruit to capture with coordinated care and better utilization management. This Arizona payment compares to the lowest Medicare cost state, Montana,  at  $7576 per enrollee and Florida, the highest payment per enrollee at $11,893 based on 2009 Medicare payments (Kaiser Family Foundation, 2009; Kaiser Family Foundation, 2009).