Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.Economy

Back in 2011, officials at Seton Health Alliance were anxious to change the way its doctors delivered health care. The Austin-based hospital system didn't want to get paid just for the sheer volume of surgeries and patient visits their doctors delivered.

Executives wanted to try something new: They wanted Medicare to pay them for taking better care of patients.

Seton Health also wanted to move as quickly as possible. So in December 2011, it became a Pioneer Accountable Care Organization, one of 32 health systems across the country that would -- as the name implies -- pioneer value-based care, and get paid for hitting certain quality metrics.

"It was appealing to us because it was the first opportunity and the first start date for one of these programs," Greg Sheff, the group's chief medical officer, said. "We really believed in it."

Seton invested millions moving to a value-based system. It hired new nurse coordinators, to ensure patients got higher quality-care and installed new data systems that made it easier for doctors to talk to one another.

This all makes the next twist in Seton's story a bit of a surprise: It has decided to leave the ACO program, switching to a separate federal program with a bit more flexibility–and no financial downsides if quality does not improve.

"We knew [signing up for the ACO program] was the right decision at that point in time, but have always thought we would continue to reevaluate," Sheff says.

The results of the Accountable Care Organizations' first year, released last year, are a bit difficult to interpret. All the hospitals did show success in improving on quality measures, rates of re-admissions and monitoring of cholesterol levels.

On the other, 14 failed to produce any cost savings – and nearly a third of them also decided to stop participating in the program. Seven switched a different, less aggressive Medicare program, while two dropped out altogether.

"It's not perfect, obviously," says Chas Roades, chief research officer at the Advisory Board Company, which advises hospitals. "But no one expected it would be a home run in the first innings. What we've heard from a lot of our members is that the first year was a bit bumpy."

I've spent the past few days talking to the ACO dropouts, trying to understand what didn't work for them and why they went a different path. I tended to hear variations on a theme: They liked the idea of value-based care and still plan to pursue it. They just didn't see this much-touted federal program as the best way forward.  With so many different experiments in the hopper right now, something had to give.

"Administratively, it was very difficult," says David Spahlinger, executive director of University of Michigan's Faculty Group Practice. "We had to maintain two different databases, and two different contacts at Medicare. In the end, we decided we would move out of the pioneer program."

University of Michigan, Spahlinger explained, already had another group of doctors who were participating in the Medicare Shared Savings Program. After a year, it seemed like a waste of resources to participate in two, federal demonstrations. So, for year two, they'll merge their ACO demonstration into the already existing MSSP.

"I take responsibility for underestimating the amount of work of doing two different programs at once," he says.

This actually gets at a feature of the health care law that, depending on how you view it, could be a virtue or a vice. The Affordable Care Act includes 45 separate provisions meant to reduce the cost of health care. It's a "kitchen sink" approach: Trying lots of different demonstrations and hoping that, between the 45, a few prove especially successful.

This, however, can prove an administrative nightmare for hospitals, especially when it means managing a completely new system for a relatively small number of patients.

That has proved a challenge for hospital administrators like Todd Sandman, who oversees patient engagement at Presbyterian Health Care Services in New Mexico. The hospital system left the ACO program, he says, so it could focus more of its efforts on the 400,000 Medicare beneficiaries in the Medicare Advantage plans it runs–rather than the 12,000 assigned to its ACO.

"We'd be better off putting our energy into the health plan we already have," Sandman says. "We didn't have the confidence, based on historical trends, that we could beat the trend. We would have been in a loss position and writing a check back to Medicare."

Seven of the nine hospitals that left the Pioneer ACO program transitioned to the Medicare Shared Savings Program, generally seen as a smaller, less aggressive step toward reforming health payments. Most notably, the Medicare Shared Savings Program has upside risk but no downside; hospitals aren't penalized if they don't produce lower cost care.

By contrast, these hospitals would have faced the possibility of losing money had they stayed in the Pioneer ACO program.

"To me, it's like dropping from the major leagues to AAA," Erik Johnson, a senior vice president at Avalere Health, said. "They're dropping because they want one-sided risk. Most physician groups aren't accustomed to dealing with risk at this point."

Seton isn't giving up on value-based health care; it's among the seven hospitals transitioning into the other.  It's entering into contracts with private insurers, too, that use an accountable care model. But the ACO program that the feds came up with was, after a year, too rigid for the hospital system.

"We were more comfortable moving into that program, where there would be no shared losses," Seton Alliance's Sheff says.

Is this a health reform success story, where a new program didn't quite work out, but did lead a health care system into other value-based payment models? Or is this a failure of the health care law, with Seton Alliance giving up on a nascent program?

From where Sheff sits, he sees it as the former.

"It helped us get more comfortable and the other part is that it helped payers get more comfortable," he says. "The Medicare pilots are driving changes on the commercial front. I don't know if we'd even be having these conversations if it weren't for the Affordable Care Act."

KLIFF NOTES: Top health policy reads from around the Web. 

Why do some medical ideas spread quickly, and others take ages? "This has been the pattern of many important but stalled ideas. They attack problems that are big but, to most people, invisible; and making them work can be tedious, if not outright painful. The global destruction wrought by a warming climate, the health damage from our over-sugared modern diet, the economic and social disaster of our trillion dollars in unpaid student debt—these things worsen imperceptibly every day. Meanwhile, the carbolic-acid remedies to them, all requiring individual sacrifice of one kind or another, struggle to get anywhere." Atul Gawande in the New Yorker

Humana to the rescue! "Filling a potential coverage void, Humana Inc. said Friday it will sell health insurance in 36 Mississippi counties that might have otherwise been left out of a marketplace for subsidized policies sold under the Affordable Care Act. 'I’m elated,' said Mississippi Insurance Commissioner Mike Chaney, who had been working to make the deal happen. 'I’m grateful. I’m thankful. Every word I could use to say I’m very pleased.'" Jay Hancock in Kaiser Health News.