The Thing to Watch in the Medicare ACO Regulations


Health care lobbyists and advocates are bracing for six pages of the health care reform law to explode into more than 1,000 pages of federal regulations when the Department of Health and Human Services releases its long-delayed accountable care organization rules this week. Politico

What should you be looking for as you snuggle by the fireplace this weekend reading the draft ACO regs?

Rob Lazerow writes a helpful article listing 5 Things to Watch in the Medicare Shared Savings Program Proposed Rule. His list of five key design issues includes:

  1. How will patients be assigned to ACOs?
  2. To what cost benchmark will ACOs be compared?
  3. How will bonuses be calculated and paid?
  4. For which quality metrics will ACOs be responsible?
  5. What is the application process?

I’d like to add a sixth  item — which actually would be #1 on my list.

As I’ve previously written, IMHO the central issue around ACOs is:

Are (hospitals and doctors) viewing ACOs as a way to truly develop patient centric, collaborative care or as a means toward consolidating market power against payers? We really don’t know.

So here’s item #6:

6. What incentives and safeguards will assure that ACOs are focused on coordinating and integrating clinical care vs. consolidating market power?

Here are some specifics I’ll be looking for:

  • How meaningful are guidelines, metrics and thresholds that define and specify elements of clinical integration?
  • Are doctors and hospitals incentivized to provide value? How will this be measured?
  • Will there be explicit safe harbors clarifying anti-trust and other regulatory issues? Will there be allowances for meaningful collaboration among providers? Will there be penalties for collusion leading to higher prices?
  • Are the ACO Shared Savings regs designed to be an end point financing/delivery model or a first step in a transition toward shifting some downside risk to care providers (e.g., bundled payments or episodic payments)? There’s a danger that this initial Medicare shared savings ACO approach could become the worst of both worlds:
    • retaining the perverse incentives of current fee-for-service payment while adding potential for bonuses
    • not providing sufficient long-term incentives for care providers to change systems and workflow to improve patient care.
  • Will there be specific requirements for ACO information technology?
  • …and others (please add your comments).

Vince Kuraitis JD, MBA, is a health care consultant and primary author of the e-CareManagement blog where this post first appeared.

6 replies »

  1. ACO’s are not patient centric, and the idea that people will be able to seek care out of the ACO is laughable.

    ACO’s pit doctors and ACO’s against patients for their living. Not somewhere I want to be when I am in need of medical care.

    This whole ACO concept is ill thought out and based on hopes and wishes, but most of all, the desire of a lot of different players to get their hands on the money.

    The idea that hospitals can save health care dollars is laughable.

    NEJM article of March 24 showed that ACO’s lose money for the first three years. Guess what…they will never make money, except under the most extraordinary circumstance. The economics of picking 5000 random Medicare beneficiaries and believing that an ACO model is going to be able to account for differences in that population is laughable. An ACO in Myrtle Beach SC composed of 5000 affluent 67-70 year olds and physiologic ages of 55 is one thing, an ACO in West Virginia with people an average age of 70-72, a physiologic age of 85, and with 1000 people in a nursing home are going to present quite different economic costs.

    ACO’s are designed to sever the physician patient relationship and replace it with an unaccountable bureaucracy which will practice protocol medicine and in which doctors who don’t fit the cost curve are removed. ACO’s are an inherent conflict of interest set up to convert patients to population based models, and physicians to stewards of public resources instead of representing the patient’s best interest.

  2. My understanding is that assigning patients to an ACO is more of an accounting concept than an HMO concept. Patients will be allowed to seek care outside of the ACO but for tracking and accounting purposes, all healthcare care costs incurred by a given patient will be assigned to a specific ACO.

    I’m troubled by plans to reward providers with bonuses if they provide care at a total cost below a predetermined benchmark but not penalize them if care costs exceed the target. The potential to earn a bonus needs to be balanced by the risk of penalties for exceeding cost targets but, historically, providers were reluctant to accept such risk, presumably, because they can’t estimate healthcare costs with sufficient accuracy.

    Hospitals have very high fixed costs inherent in their business model. To the extent that they successfully help to reduce utilization of hospital services, they are likely to suffer financially even if they are eligible for a share of an ACO’s bonus for beating cost and quality benchmarks. Separately, the issue of the potential for further consolidation among providers to give large hospital groups even more market power is a serious one. Regulators need to be alert to this and prepared to move quickly to mitigate it or, hopefully, prevent it from happening in the first place.

    Finally, it seems that much of the benefits from improved care coordination could come from broad implementation and use of interoperable electronic medical records. We may not need to form ACO’s to achieve that. At the same time, if more doctors become hospital employees, it should be easier to achieve buy in regarding standardization of procedures and processes, including use of checklists.

    If the objective is to reduce healthcare costs, I think there is more potential if we just stop paying for services, tests, procedures and drugs that either don’t work or aren’t cost-effective. We need to be able to draw a line somewhere on what we’re willing to pay for. Just yesterday, for example, Medicare agreed to cover the $93,000 cost of Provenge, a new treatment for prostate cancer that extends life by about 4 months on average. That equates to $279,000 per QALY even if no other care is needed or provided. If it were up to me, I wouldn’t pay for Provenge. For $45-$50K, I probably would.

  3. Assigning patients like you own them is going to be great for the 2012 election.

  4. Vince,
    I would argue that in view of #1, your concerns about patient centric care are superfluous because this is not going to be a patient centric proposal, at least not the way I understand the term patient centric.

    I am in the middle of reading this little jewel from PCPCC, Dartmouth and the Commonwealth Fund
    and just came across this nugget:

    “If patients are assigned providers under an ACO model, we may see consumer pushback as they perceive their choices are being made for them, rather than in collaboration with them. There is a need for “first principles” that reinforce the power of the primary care/patient relationship, so patients clearly understand that their health is an asset
    worth supporting collaboratively.”

    I don’t understand what “first principles” are or what this paragraph says.
    Is it something like “too bad, live with it…”?
    Frankly, I am a bit tired of this double talk and I expect the 1000 pages due out to treat “patient centric” concerns the same exact way.