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The Health Reform (Almost) Everyone Loves

Come with me to the land of happy health reform. It is a place where Republicans and Democrats find common ground, a place where physicians, hospitals and health insurers sit together as partners, a place where criticism is respectful, not rancorous. It is the world of Accountable Care Organizations (ACOs).

What are ACOs, and why have they escaped the general onslaught of opprobrium from Obamacare opponents?

The term Accountable Care Organization was originated by Elliott Fisher of the Dartmouth Center for the Evaluative Clinical Sciences, picked up by the Medicare Payment Advisory Commission and then enshrined in Section 3022 of the Patient Protection and Affordable Care Act (otherwise known as health care reform). The language is explicitly designed to use financial incentives to change the health care delivery system.

ACOs are defined less by form than by function. A group of physicians, possibly with a hospital, agrees to manage the full spectrum of care for a defined population of at least 5,000 Medicare beneficiaries for a minimum of three years. If the ACO meets certain targets for quality and cost-effectiveness, it gets to keep part of the savings.

In theory, everyone wins under this arrangement; that is, efficient and effective providers are rewarded, the government saves money and patients are healthier.  Whether the ACO theory will work in practice is an important question, but not as intriguing at the moment as the political one: why aren’t politicians and special interests screaming invectives at each other? I think there are three characteristics that explain the ACO love fest and speak to whether it might be replicated in other areas.

Perhaps the most important ACO characteristic is that its theoretical underpinnings have broad and deep bipartisan support. The idea of using financial incentives to organize care delivery more efficiently is not new. During the 1980s, however, proponents began to believe we could actually measure high-quality, cost-effective care and reward those who practiced it.

Over the years, a steady stream of books, journal articles and white papers has turned what was controversial into conventional wisdom. For example, in April, a bipartisan group of House members announced the formation of the Quality Care Coalition, “to provide Members of Congress a forum to transform the health care system to reward value in care and make evidence-based, quality care the standard.”  It also helps that ACOs address how we organize care for the already insured, rather than the redistributive hot button of coverage for the uninsured.

The second advantage of ACOs, nearly as important, is that the concept promises to put money in the pockets of a broad range of stakeholders. Doctor groups and hospitals around the country are scrambling to form ACOs in an effort to extricate themselves from the Medicare fee-for-service squeeze. For example, 19 health systems affiliated with the Premier healthcare launched two collaboratives designed to create ACOs responsible for the health of more than 1.2 million patients.

The complex challenges inherent in setting up and running a successful ACO also means most aspirants will be seeking some sort of help. They’ll need state-of-the-art information systems, ongoing legal advice and maybe even some help from an experienced insurer in taking on risk. Given all the unknowns, consultants and vendors of every stripe are sure to flourish.

Which brings up the third reason why ACOs are popular: ACOs are “government light,” at least for now. There are no mandates; providers can choose whether or not to form an ACO. There’s also plenty of room for innovation in accomplishing the ACO’s legislative mission. “Virtual ACOs” involving independent physicians in private practice are just as acceptable as the large, integrated systems repeatedly rolled out as role models.

Moreover, while HHS must launch the ACO program by Jan. 1, 2012, detailed regulations are not required until year-end. In their absence, no stakeholder can squawk that the government has gotten it wrong. And, of course, until the program begins, there are no complaining losers, only potential winners.

Unfortunately, the replicability of the ACO reprieve from partisan bickering may be limited. There are other delivery system reforms, and even some insurance reforms, that have bipartisan support similar to that enjoyed by ACOs, but there are few that can promise to put money in providers’ pockets while soothingly assuring them that those who want to ignore the new ways of practice and continue to practice as usual will be able to do so. Indeed, some skeptics question whether the blessing of providers for ACOS was obtained at the cost of weakening their ability to make a cost and quality difference; the details of final regulations and cost-quality standards will be the test that argument.

In its 2001 report, Crossing the Quality Chasm, the Institute of Medicine famously called for a fundamental change in the way delivery of care is organized. “Trying harder will not work,” said the IOM. “Changing systems of care will.”

ACOs, bringing together providers to take responsibility for meeting specific quality and cost goals related to care across the spectrum, unquestionably symbolize the kind of change the IOM was asking. Whether the enthusiasm for the concept in theory will be justified by the ACOs in practice is the larger question remaining to be answered.

This article first appeared on Kaiser Health News.

Michael Millenson is a Highland Park, IL-based consultant, a visiting scholar at the Kellogg School of Management and the author of “Demanding Medical Excellence: Doctors and Accountability in the Information Age”.

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elizabeth Rowe
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elizabeth Rowe

The ACO is just a reprisal of the old HMO model that died because it deprived patients of any choice of doctors. The ACO model has MANY flaws: 1. The cost savings will come from limiting serices to patients, not by “capping charges” and still providing the same services. 2. Not only will patients not have doctor choice, but doctors employed in these systems will not have control over their treatment of patients–an ethical bind, nor over their choice of specialists to refer to, also an ethical bind. 3. This ethical dilemma will keep the best doctors out of these… Read more »

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CK Sud
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Honestly, I get a bit suspicious whenever “everybody wins’ is marketed. Yes, sometimes there are win-win situations, but they are rare. Our healthcare system is bloated and we spend more as a percentage of our GDP as compared to any other country in the world – that is a given fact. So, it goes without saying, there is wastage in the system. And any solution needs to target the wastage, which will create some losers. when the regulations/details are announced, watch out for fireworks. I may not agree with ExhaustedMD that Health care reform is a total nightmare, but I… Read more »

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Will Medicare beneficiaries be permitted to opt out of receiving their care from an ACO?

Kim
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Kim

I think I have to agree with Mr. Bryon’s post – haven’t we been here before? During the 90’s there were widespread efforts to shift risk to provider organizations, usually with some shared savings and often with some quality incentives. While some of these arrangements still exist, many fell by the wayside as the provider organizations found that managing risk was not as easy as they expected. What is different now? I am always amazed how even educated people seem to forget that “savings” mean loss of income for some entity. If ACOs are going to be successful, the question… Read more »

Peter
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Peter

“He got a 80% reduction just in coding.”
So this was either a coding error or coding fraud? That’s a lot different from you saying the patient can get their provider to reduce what the provider says are “legitimate” charges.
So you refusing to pay charges that you consider too high is not capping charges? Can’t have it both ways Nate.

Nate
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Nate

Do you really think the provider is going to sit down with the patient and justify their bill. I love how liberals argue on their experience and facts and not what is feed to them via the propoganda machines. To answer your question Peter since I see it every day yes I do. Just this morning I had a meeting where we discussed a claim where the member went back to the provider three times to have it recoded and reduced. He got a 80% reduction just in coding. Hospitals and providers spend millions trying to market an image. Poor… Read more »

Peter
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Peter

“If a provider has abusive pricing in a free market I as the payor just cap what I reimburse, the provider then needs to justify their charge to the patient.” I love this one Nate. Single-pay countries actually do cap what they pay but they don’t unload the extra costs to the patient. Do you really think the provider is going to sit down with the patient and justify their bill. Ever looked at an EOB – “This is what we billed, this is what the insurance paid, this is what you owe.” “Pay or we send this to our… Read more »

Nate
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Nate

Margalit you might have some interesting conversations if you ever dropped the sound bites and preconceived notions. I deal with self funded plans, my profit margin has ZERO relation to claims paid or loss ratio. PCP would the ACO have the option to contract? The alternative is my employer doesn’t have an agreement and we say we are going to pay X anyways. They can’t refuse to treat the patient so they are in the same place either way. Its been a battle we have faught many many times in rural communities. You can have an employer that is 20-40%… Read more »

pcp
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pcp

I don’t think a powerful ACO would contract with a payor that only covers a percentage of their “global fee” for an “episode of care” (whatever that is), requiring them to chase after the patient for the balance.

Margalit Gur-Arie
Guest

“I as the payor just cap what I reimburse, the provider then needs to justify their charge to the patient”
And what exactly do you expect the patient to do now that you figured out how to maintain your profit margin?
If the ACO is big enough, there’s no other choice in town anyway. If you (the payor) limits my choice to your network in order to pay up to cap, then between you and the provider, this is highway robbery. Not very American after all.

Nate
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Nate

Mike, They use a FT equivalant formula that not only counts part timers but seasonal. A broker I work with has a client that makes Candy that has no idea how they will stay in business. their labor force goes up 10 fold during 5-6 holidays each year. I suspect this will have drastic consuqiences on part time and seasonal help. Small business just wont be able to hire them. “It seems to me that in your particular line of business, dealing with a corporate, and most likely monopolistic entity, would present certain difficulties. Will it not?” Sure does, ideally… Read more »

Peter
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Peter

“Killing Marcus Welby”
You mean Doctor Pay-Me-Later Welby who always spent endless time with patients?

paul c.
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paul c.

Here’s an over the top piece against ACOs, from the New York Post —
“Killing Marcus Welby” — http://www.nypost.com/p/news/opinion/opedcolumnists/killing_marcus_welby_FLnABqCKwpyF9j2i9YYpCP
I think it portrays the age of the writer probably more than anything. Who, other than people who pay everything out of pocket and perhaps some Medicare beneficiaries, have had a doctor/patient relationship like the Welby-model since 1980?

pcp
Guest
pcp

1. Is there any evidence that patients will be more willing to accept rigid limits on choice of hospitals and docs that they were in the early 90s?
2. Won’t the largest ACOs have tremendous bargaining strength that will allow them to demand higher (not lower) payments?