ACOs: Health Care’s Big Project

Medicare beneficiaries who are patients of 32 groups of health care providers have started to receive letters informing them that they are now patients of an Accountable Care Organization, or ACO.

ACOs are the focus of a new Medicare demonstration project that is testing out a new model for health care delivery and payment. The ACO demonstration is one of many demonstrations that the Affordable Care Act has planned.

The ACO project relies on a coordinated care system: organization and communication between doctors, hospitals, and other care providers to better coordinate care for patients. The improvements in care come from the potential that lies within sharing information about a patient between medical offices, avoiding unnecessary repeated procedures, and other improvements in the efficiency of medical care providers. The efficiency, along with the improved care being given to patients, is said to lead to savings for the medical care providers. Better care means healthier patients, which ultimately means that patients will be less likely to need some of the more expensive medical care, such as visits to the emergency room. 

The demonstration is led by Center for Medicare and Medicaid Services (CMS). The ACO demonstration is the third of its type that CMS has undertaken; following a demonstration that began in 2000, and a second in 2005, that investigated the efforts of care groups that were already coordinated to a certain degree, and the benefits that lay within that coordination. For this demonstration, health care provider groups will be measured on 33 points of quality and efficiency in treating Medicare patients, while receiving in return one of two different types of bundled payments from Medicare. The first package allows for less risk, in that CMS will act as a financial buffer if the ACO model is not successful, but a small percentage of the savings, while the second offers the reverse situation to provider groups.

32 groups signed up to participate in this demonstration, including many programs in the Midwest, such as the OSF Healthcare System in Central Illinois. Each of the participants represents one ACO, that is, a coordinated group of physicians, many of which were not coordinated prior to this demonstration. Each participating group must meet specific ACO criteria, such as having established an adequate organizational structure that accounts for not only medical care, but also the necessary administrative and legal processes that go along with coordinated care. Furthermore, all participating ACOs must have 5,000 or more Medicare participants participating, and must have defined the ways in which they will be working to improve the care for those patients, as well as the metrics they will use to measure that quality. If the demonstration goes as planned, the ACO groups will be able to improve the health of their patients in such a way that cuts down on costs, saving the ACO and Medicare money.
              

 If successful, the ACO demonstration could mean bigger changes down the line for health care reform.  In essence, the program uproots the current fee-for-service health care model, in which medical care providers are paid for each service they provide for patients, for a new one. As Ezra Klein phrased it in a blog post: “The hope is to do nothing less than change the basic business model of American medicine from making money by getting patients to spend more money to making money by saving patients money.”

Responses

Although the responses to the ACO demonstration all seem to emphasize that changes to the current health care system must be made, the demonstration has stirred up criticism from those in the medical sector:

•     Some see the project as too risky for medical provider groups—particularly if that group is middle range or smaller, meaning that to establish a care coordination model is a substantially greater undertaking, and thus, a greater risk as well.
•      Others are wary because of a past failed attempt at revamping the health care system, namely Health Management Organizations, or HMOs. An HMO is an insurance plan that only allows beneficiaries to see the doctors and providers who have agreed to participate in the HMO plan. The original intent of HMO systems was that by organizing a managed care group of providers for each patient, the costs would be reduced for insurance providers, and thus, for the patients—similar to the way ACOs are predicted to cut costs through provider organization. However, costs were not ultimately lowered for insurance companies, and patients were asked to sacrifice flexibility in choosing providers without paying less in the long run. Some critics of the ACO plan say that it will be doomed to the same fate.
• One big factor in the success of ACOs are the patients themselves. Since the majority of the expected savings will come from keeping patients out of the hospital or from requiring expensive visits with specialist doctors, a lot is riding on the patients’ ability to remain healthy. Suppose a group’s patients are unable or unwilling to make lifestyle changes prescribed by their doctors that could be the key point in the success of their preventative care, and they all end up in the emergency room, despite their doctors’ best attempts? Or, suppose a physicians’ group is just unlucky, and for the first few years of participating in the ACO program, they have a high number of patients who end up in the hospital for unforeseeable circumstances? In these cases, the hospitals or physicians’ groups would most certainly lose money in the ACO model. These concerns are exacerbated when one considers the fact that patients will not join the ACOs willingly, but will be assigned, may not understand what the ACO or their role in it entails, and, currently, receive no extra incentives or benefits from active participation. In contrast to concerns over the role of patients, some are saying that if ACO models do save Medicare money, the result could be lower premiums or co-pays for Medicare beneficiaries. Furthermore, there could be savings for private insurance companies, as well, which could translate to lower premiums and co-pays for private insurance customers down the line.
•  Others are concerned that the costs of establishing a coordinated care system are just too high, and will not be offset by the predicted savings. Estimates for this cost range from $10$30 million dollars in consultants’ fees, IT staff, systems and equipment, systems care management, extra trainings, etc. Even if the ACO program does return substantial savings to a group, the savings may not cover those costs for years. Furthermore, the start-up costs may be too great for all but the largest hospitals or physicians’ groups.
• Some are citing the two previous demonstrations that are the model for this ACO Medicare demonstration were not successful enough to guarantee any type of success with ACOs.  Since those demonstrations worked with groups that were already coordinated care organizations to some extent, to expect to see similar results with as of yet uncoordinated groups may be setting the bar at an unrealistic height.
• Others are worried that the structure of the ACO demonstration and the lack of a safe middle ground between cutting costs and losing money will have coordinated care groups shifting the focus too heavily on saving money, instead of on finding innovative ways to provide patients with the quality care they require.

The CMS has been listening to these concerns, and although a successful outcome is still far from guaranteed, they have made some alterations to the original ACO proposal, with things like advanced payments to provider groups to help offset coordination start-up costs, increasing financial incentives while reducing financial risk, and allowing for a broader variety of governance structures within the organizations.  However, the outcomes, both positive and negative, remain to be seen.