CMS Wants Docs to Ante Up to ACO Poker Game

In a high-stakes political, clinical and economic poker game that goes by the name of Accountable Care Organizations (ACOs), the Centers for Medicare & Medicaid Services (CMS) has just issued a call for doctors and hospitals to  grab some chips and ante up.

The set-up goes like this: one of the biggest potential changes in how health care is actually delivered contained in the Accountable Care Act was ACOs. They’re voluntary, but they allow doctor- or hospital-led organizations that take responsibility for coordinating the care of at least 5,000 Medicare beneficiaries to get reimbursed at a higher rate for providing better-quality, lower-cost care. It’s supposed to be a win-win-win for providers, patients and taxpayers and part of a more general move towards “value-based purchasing.”

The problem is that the draft rules proposed by CMS for ACOs back in March looked like a sucker’s bet. Not only were the requirements complex and expensive, the rewards were meager and the odds of winning were unattractive, particularly considering the initial costs to set up an ACO. The big health care systems and physician organizations that had been clamoring for a seat at the table when ACOs were first proposed told CMS they didn’t like the “house rules” and weren’t going to play. Although the concept of ACOs has deep bipartisan roots, a group of Senate Republicans anxious to pounce on any  administration shortcomings jumped in with “serious concerns” about one more possible ObamaCare failure.

But the final regulations released Oct. 20 simplify the rules, sweeten the pot and even pull up a few new chairs. They make it easier for would-be ACOs to get paid (sharing “first-dollar” savings), reduce bureaucratic hassles (no more micromanagement of marketing materials), simplify the measures of success (33 measures in 4 domains rather than 65 measures in 5 domains) and provide financing to allow new players, such as federally qualified health centers and rural health centers, to get into the game.

Of course, the final regs won’t depoliticize ACOs or, given the near-universal unhappiness with the draft rules, won’t entirely succeed in the equivalent of spinning straw into gold. But with CMS proclaiming its intention to be a valued partner rather than a green-eyeshade overseer (OK, they don’t actually use that last phrase), the ACO program should be attractive enough to entice some of the high- roller headline names in health care to belly up to the table. The ultimate goal is to use financial incentives to reward better care. With private-sector ACOs also growing in importance — they’re a big priority for insurers like Aetna and UnitedHealth Group, this is a game where we all have a stake.

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”.

59 replies »

  1. January twenty first: Secretary of State Hillary Clinton criticizes China in a speech on web freedom stating
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  2. Docs need to stop bitching and moaning and band
    Together to make a change. We gave away our
    Independence to the CEOs for pennies. Insurance companies
    Pharmacies and patients cannot manage without
    Doctors. Stop selling out and say NO. If they think
    Replacing us with RNs and PAs will work. Go for it and call
    Us when your ready to give up control and we will then clean
    Up the mess.

  3. Whoa there partner, before we get all full of politics and whiskey and the guns come out we should recognize the the health reform package thats seems all new to people was really the work of early pioneers like nate ( great comments on HMO act of 73) and obamacare and romney care has its basis in nixon care
    This is a logical although painful realization that we have at least 30% of the health care dollar wasted nationally and when we add to that inefficiencies that create barriers to needed care ( access) and costs that have risen 60% since nixon( affordability) and quality concerns that really call into question the value of our care ( quality) the evidence is overwhelming that something needs to change. Policiticians have gotten away with disassembling health reform and calling it insurance reform ( gingrich) but that just changed eligibility and coverage and did not get to the root cause of why health care cost so much. ACOs are getting us to that change in the delivery system that no one has had the intestinal fortitude to change but now we are on a burning platform. I would suggest all skeptics read the early Kennedy proposals and Nixon legislation and then go to the Institute of Medicine website and research these early and onging publications that underscore page after page of problem identification and page after page of case study solutions all done at the local level and all done without heavy regulatory interference all done with smart and creative people who understand the early framework of HMOs before managed care came to town. This is a high stakes game of poker and everyone has been dealt a hand. How you play that hand and exchange waste for improved resource utilization will dictate winners and lossers in the next 5 years.

  4. Margalit –

    I agree that the problem of high healthcare costs and excessive utilization in the U.S. is multi-factorial and requires several different approaches that can be pursued on parallel tracks. For example, I’ve consistently advocated for price and quality transparency tools available to both patients and referring doctors coupled with tiered networks offered by health insurers in order to steer as many patients as possible toward the most cost-effective, high quality providers. I think we need tort reform, especially safe harbor protection from failure to diagnose lawsuits, for doctors who follow evidence based guidelines where they exist. We need more aggressive efforts to combat fraud including robust ID cards including a picture and biometric identifier for all providers authorized to bill Medicare and Medicaid. We need much more widespread use to living wills and advance directives and the information should be stored electronically so it’s available to doctors and hospitals when needed. Finally, CMS needs to be able to specifically take costs into account in deciding what services, tests, procedures and drugs it will pay for and not pay for. If they provide political cover in doing so, private insurers will follow CMS’ lead. If all else fails, we will ultimately have to resort to explicit rationing.

    One interesting issue that doesn’t get talked about with respect to relatively high specialist compensation in the U.S. is the fact that the opportunity cost related to what these people could earn in other fields, including business and finance, is higher in the U.S. than it is in Europe, Canada or Japan. I understand that doctors shouldn’t be money driven but there are limits. They may be perfectly willing to undergo longer training and ultimately earn half of what they could if they pursued a career in business or finance but they’re not willing to work for 10% or 20% as much. So, it may well be that their compensation in the U.S. as a percentage of what they could earn in a more lucrative field is not significantly different from their European and Canadian counterparts.

  5. There is another implied assumption here that I very much dislike.

    Are we saying that unless we throw $50 bills at doctors, they will not have these conversations with patients that need to have them? There are plenty reimbursable counseling CPT codes already. Why is this one singled out?

    And which one is next? The “conversation” about abortion being murder for all women contemplating one? No, not mandatory, of course. We just give you $50 bucks if you do. After all we know that doctors will do anything for $50 and it’s the right thing to do.

    There is no such thing as unintended consequences. It all falls under lack of thinking and poor planning.

  6. “If we want to reduce costs, we need to attack unnecessary and inappropriate utilization, not CEO compensation and middlemen.”

    I do agree that we need to reduce inappropriate and unnecessary utilization, and as I argued above, I believe much of this type of utilization is occurring because of reasons unrelated to patient demands.

    Most folks don’t go to doctors to get stented. They go because they have pain. Most 85 year olds with Alzheimer and CHF do not ask for PSA testing while in the hospital for one last time (true story, including biopsy).
    I believe these things are inflicted on them for financial reasons, both to make money and, to a lesser degree, to prevent financial losses due to misguided law suits.

    Then there are more than enough published numbers showing that the prices we are paying for each unit of service are significantly higher than other developed countries. It could be that we lack the expertise to run operations efficiently and hence the costs are higher here, but I seriously doubt this is the case, considering that other industries in this country do not exhibit such blatant incompetency.

    When you separate the contribution of each factor to rising costs, they all look like drops in a bucket, because there are so many.
    Physician fees, hospital profits, insurance profits, pharma profits, device profits, DME profits, HIT profits, CEO salaries, self-referrals, malpractice, administrative overhead, fraud, unhealthy lifestyles, hypochondria, a culture of fighting and winning, poverty, demographic makeup,,…. and the list goes on, on both sides of the isle. But before you know it, all these drops in the bucket add up to a full bucket.

    We are terribly misguided if we think that there is one thing that makes health care costs unsustainable. It would be glorious if there was, but if we are to be successful, this is going to be drudge work in the trenches on dozens of unexciting fronts, not some magical grand innovation, and not rearranging the infamous chairs of payment and reimbursement.

    We just need to take each drop in that bucket and make it smaller, drop by drop. Or we can take a short cut and “change the culture”. So instead of the bright colored dressed young and strong folks who are now standing up to cancer with a determined look on their faces, we would have TV commercials featuring pastel clad, serene frail and elderly folks encouraging us in soft voices to embrace cancer and opiates as a beautiful way to a sun lit heaven.
    Is this the culture change we have in mind? That’s not who we are, that’s not how we got here, and I don’t think that’s who we want to become.

  7. The second part of the Religion and Ethics News Weekly series on end of life care focused on living wills and advance directives. The piece highlighted how the process works at the Gundersen Lutheran Health System in LaCrosse, WI. They offer thorough end of life counseling for their terminally ill patients and encourage them to execute living wills and/ or advance directives so both providers and family members know ahead of time what services and interventions the patient wants and doesn’t want.

    At Gundersen, 96% of their patients have executed such documents as compared to something like 25% for the country as a whole. No effort is made one way or the other to guide or encourage patients to choose comfort care only or very aggressive care. In the end, care during the last six months of life costs 30% less at Gundersen than the national average while patients and families get the care they want and don’t get the care they don’t want. The fact that Gundersen’s doctors are paid a salary as opposed to fee for service is also helpful, I think. It’s a model that others could replicate fairly easily. I don’t know why they don’t or won’t. That all said, there probably needs to be a specific billing code for end of life counseling sessions so providers can get paid for them.

  8. “was for Medicare to pay for end-of-life counseling. To turn something non-political”

    LPCP was just a bunch of suggestions and now it has murdered healthy people. All government regulaltion starts off small and non intrusive. Medicare use to pay providers market prices, until it needed to save money then it just changed the rules.

    Its very easy to see how Medicare could passivly reimburse for the session. 5 years from now they need to save some money so the session is mandatory. Then once they have all this data and we need to cut more money they go full LPCP.

    Who would have ever thought government would tax what we eat and drink to change our behavior?

    Who would have thought the government would try to mandate immunization?

    Radicals love to claim they are only taking an inch when they already have plans to take a foot.

    Someone that can think for themselves should start with the question why do we need government involved int he first place? How much does such a session cost? Look up the word insurance, if everyone needs to have a session then its really not an insurable risk, your talking about financing it which Medicare is terribly inefficient at.

    Everyone should have a will, does that mean government should be paying attorneys for to prepare them?

  9. I know, and it is consistent with my point. Health care wasted on sniffles is a tiny fraction of the problem.

  10. Nate, you’ve confirmed that the major managed care backlash was in the 1990s, as I said and you originally disputed. You’ve also confirmed that you still have a problem with facts. The proposal in health care reform, from a Republican, was for Medicare to pay for end-of-life counseling. To turn something non-political — the option for individuals to be counseled in an emotionally trying time — into a government-mandated death panel is radical. Your outrage reminds me of the left-wingers back in the 60s and 70s who viewed everything as a government plot. There are plenty of places those on the left and right can disagree, but blowing up a voluntary, centrist proposal like end-of-life voluntary counseling –something based on humanism, not politics — is the mark of irresponsible radicals.

  11. Being the person selling and managing the plans I remeber pretty well what we were doing in 1988 and what we were doing in 1996. And this was in NV and CA, CA being the hot bed of HMOs. The 80s were spent moving people from Indeminity plans to HMOs or PPOs. PPOs were mandatory and received a lot of push back, telling people they had to see doctors on a list was a big change. Through the 80s HMOs were hardly ever the only plan offered. The only reason most employers even offered them was becuause federal law said employers over 25 had to offer an HMO. They would offer the HMO as required by law then a PPO plan.

    Again this is only based on actually doing the meetings and enrolling people, but in the late 80s and early 90s the people that chose HMOs, young and healthy, LOVED them, they were less expensive and had low out of pocket.

    It wasn’t until the cost difference from HMOs peeling off all the healthy risk forced groups to go 100% HMO, which didn’t happen until the early and mid 90s, that those people that didn’t like the PPO concept of being forced to see who they were told were now forced into the even more restrictive HMO model and complained like heck.

    Was it payors driving the system or the Federal Government passing laws telling employers what plans they would offer and what contributions they would make to those plans? Up until 88 employers had to subsidize HMOs for healthy people at the same rate as PPOs for high cost people giving HMOs a HUGE cost advanatge. Up until 1993 it was still federal law to offer HMOs, that sounds like government was driving it, and as we came to find out drove it over a cliff.

    ” there is no payment system that protects completely against abuses by providers or patients.”

    There are two that get pretty darn close. First is no system, don’t insure routine and common expenses, that solves 99% of your waste and fraud. Then for expenses that are insurable scheduled reimbursement like we did in the 40-80s….before government started fixing things.

    “GOP radicals”

    radicals? Keeping government out of our end of life decisions is radical while the left forcing themselves into more of our life is not?

    its mixing government and end-of-life counseling that is radical, the GOP isn’t opposed to counseling, they are opposed to the left and their history of failure having their hands in it. I would be willing to meet you half way on this, anyone that votes democrat or identifies as liberal should be signed up for government end of life counsiling done by the same people that run public housing, welfare, jobs training and all the other failed programs of the left.

  12. One of my favorite sayings is that everyone’s entitled to their opinions, but not to their own facts. So, sorry, Nate, the facts I’ve stated on managed care are accurate. The phrase itself originated in the business-oriented Reagan administration in the 1980s. (No one claims responsibility; Dr. Paul Ellwood invented the term health maintenance organization earlier.) The HMO backlash took place in the early 1990s as employers in the late 1980s forced employees to change. My favorite example was legislation supported by Democrats and Republicans alike, completely overriding the market, to disallow 24-hour mandatory stays for new moms and institute a two-day minimum (unless the woman agreed to less.) It was called the Newborns’ and Mothers’ Health Protection Act and was signed into law in September, 1996. Try voting against that!

    Meanwhile, when I said to step back from the details, it was not because they didn’t count — they do — but to look conceptually. To condemn HMOs because of the dollar incentives is not to say that fee-for-service or salaried docs or HSAs or single-payer must be better; it’s to say that some adjustments need to be made. Again: there is no payment system that protects completely against abuses by providers or patients. Human beings are human beings. Patients need financial incentives, too, but it’s always hard to hold voters accountable.

    Moreover, while it would be nice to focus on just where the money is, the demagoguing by GOP radicals of end-of-life counseling provisions in health reform (sponsored by a Republican in the House!) suggests that the “end of life HMO” is not coming to a hospital near you anytime soon.

  13. If you hear spooky noises and feel cold drafts its the ghost of Teddy comming for you, he doesn’t like being denied his rightous due.

    Just five years after the HMO Act of 1973 was signed into law, the U.S. Senate Committee on Human Resources, Subcommittee on Health and Scientific Research, held a hearing to discuss amending the Act. Following are excerpts from Senator Ted Kennedy’s opening statement at the March 3, 1978 hearing:

    “Today the Subcommittee on Health and Scientific Research holds hearings on proposed amendments to federal statutes supporting the development of health maintenance organizations…These amendments would extend and strengthen current authorities supporting HMOs in this country….

    “As the author of the first HMO bill ever to pass the Senate, I find this spreading support for HMOs truly gratifying. Just a few years ago, proponents of health maintenance organizations faced bitter opposition from organized medicine. And just a few years ago, congressional advocates of HMOs faced an administration which was long on HMO rhetoric, but very short on action.

    Author of the first HMO bill

    Faced administration which was long on HMO rhetoric

    Nixon signed it but this was all Kennedy.

  14. “First, the problem is not that we cannot “give” care to all. It is that we cannot “buy” care for all. The reason we cannot buy care for all is that those who sell care are asking for too much money for the care. In addition to the sellers, there are a host of middlemen who are adding to the price of care no good reason.”

    Margalit –

    There are roughly 14 million people who work in the healthcare field in the U.S. Roundly 800,000 are doctors of which about half work in primary care and are probably underpaid. Approximately half of physician fees, which account for about 22% of healthcare spending, are paid out in practice expenses, mostly for staff salaries and benefits, malpractice premiums, and office rent. Cutting specialist income by 25% or 30% might save 2% of healthcare spending or a bit more.

    About five million people work in our hospitals. Most hospital executives will tell you that roughly two-thirds of their costs are for salaries and benefits. It’s a labor intensive business. Besides doctors and nurses, there are food service workers, laundry workers, transporters, janitors and a host of others. It’s hard to see how many of those jobs could be eliminated without a commensurate drop in utilization.

    Skilled nursing facilities and assisted living centers are also labor intensive operations. Much of that labor is low paid as are home health workers. At the same time, there are millions of families providing care to frail parents and other relatives on their own at considerable cost, both financial and emotional. It would be hugely expensive to shift that burden to an institutional setting even if the capacity existed.

    We pay more for drugs in the U.S. than other countries do but more than 70% of all prescriptions are now for generics which are actually cheaper in the U.S. That number will continue to rise as the two biggest sellers, Lipitor and Plavix, lose patient protection over the next 6-12 months. Expensive specialty drugs, experts tell me, may account for 35%-50% of drug spending within five years and the price variance among countries for those is much lower.

    Insurance company administrative costs are also not nearly as large a contributor to healthcare spending as many believe. If we had Medicare for all, any savings in administrative expense could easily be more than offset by increased fraud. If Medicare spent more on analytics and other administration, it would probably have a lot less fraud as would Medicaid.

    People who claim that 30% of our healthcare spending is wasted are not talking about CEO salaries and middlemen. They’re talking about everything from defensive medicine to stenting for patients with stable angina to back surgery for patients with low back pain who would be just as well off with physical therapy to futile end of life care among other things. Even the so-called standard of care practice patterns are developed by the medical specialty societies with our litigious culture in mind. Situations that call for an MRI in the U.S., for example, would often not call for one in the UK.

    Finally, we have more poverty in the U.S. than elsewhere. The 9.7 million people who are eligible for both Medicare and Medicaid (dual-eligibles) cost the healthcare system $300 billion per year. We are finally starting to see some efforts to move more of them into managed care to provide better care coordination to save money. If we want to reduce costs, we need to attack unnecessary and inappropriate utilization, not CEO compensation and middlemen.

  15. Agree w/ Nate (!!). If ACO’s end up organizing peoples’ choices into pre-organized hospital monopolies (which is what is happening), we’re going to hate ourselves in the morning. This is the “Dawn of the Social Engineers”- the ACO industry having a second run at the line.

    Why “managed care” failed was that patients played no role. It was something done to them by their employers and health plans, not something they participated in as sentient grown-ups and got to benefit from. ACO’s are “managed care lite” and for providers it still looks a lot like Tom Sawyer’s fence painting project.

    BTW, the HMO’s came from Nixon (who by today’s Republican standards would be a flaming commie). Teddie was still hawking single payer in 1973.

  16. In the U.S

    In this post what does US stand for? In the United States it was the 90s not the 80s that HMO came and went, the 80s were still majority in indemity plans.

    Where the HMOs failed was when the PHOs, IPOs, etc failed….from all the risk they were taking on.There is ZERO difference between the provider risk in the 90s and the proposed risk in the ACOs.

    IPOs and PHOs were also local

    Finally HMOs were not driven by insurers they were driven by Politicians, thank you Teddy Kennedy, who wanted someone else to take the blame for penalizing obese people.

    When was the last time politically palatable reform didn’t blow up in a huge expensive mess, thats a guarantee for failure if the politicians find it palatable

  17. What are there 5 maybe 10 CEOs? Lets take all their money, what is that 100 million? Thats one tenth of a percent isn’t it? Wow that accomplished a lot, lets waste some more time complaining about drops in the ocean.

    “are they demanded by, or inflicted on, patients most of the time?”

    Very few doctors make house calls, so obviously they are going to the doctor asking for something

  18. Nope. The data is always helpful. Medicare is 22% of total health spending, and the last year of life costs Medicare about 28% of that. So what’s 28% of 22%? I get 6.2%. Not a small number, but not a gorilla either and certainly not King Kong. More like a baboon. . .

  19. There’s a card game named Dead Man’s Poker. It’s an apt name for the first ACO rules, which individual physicians and physicians in large integrated organizations universally declared DOA. Chaniging the rules of Dead Man’s Poker by cutting quality measures friom 65 to 33, offering more flexibility in antirust review, loosening rules of governance and legal structure, altering time to repay losses, being told what Medicare recipients can be part of the ACO, sharing Medicare savings earlier and reducing risk of losing dollars, extending the time to apply throughout 2012, and making $170 million to set up ACOs, expanding payments in rural areas and qualified federal centers, and ending the absolute demand for physicians to have EHRs to participate, does not change the status of ACOs from DOA (Dead on Arrival) to AAB (Alive at Birth). CMES estimates the new rules will incude 50 to 270 ACOs to form and will save Medicare $960 million. CMS is whistling past the graveyard. Physicians are waiting to see what the Supreme Court decides on the constitutionality of Obamacare, what the results of the November 2012 election portend, and whether Republicans can succeed in their efforts tto repeal the health care law. Until these things transpire, for most physicians, it’s still no deal on ACOs.

  20. “Step back from the details for a moment. If you can’t give all possible care anyone might want to everyone all of the time, what do you do as an allocation mechanism? ”

    At the risk of being repetitive, I would say that this question is not well posed. It is creating a theoretical problem which is different than the actual problem and therefore the theoretical solution will not solve the real problem.

    First, the problem is not that we cannot “give” care to all. It is that we cannot “buy” care for all. The reason we cannot buy care for all is that those who sell care are asking for too much money for the care. In addition to the sellers, there are a host of middlemen who are adding to the price of care no good reason.
    Yes, we could accept these high prices and proceed to triaging people’s needs. But we could also rein in the sellers and middlemen and set the prices at a level where we can buy care for all (and I am not interested in free-market nonsense in this context). Tinkering around with enhanced capitation is not the same thing.

    Second, “want” and “need” are two different things and the difference is not exclusively manifesting in end-of-life situations. Where does end-of-life start anyway? Is asking for a treatment with 90% chance of pain, suffering and failure, and only 10% chance of partial success, a frivolous want or a need? And how do we know that something we refer to as a miracle will not occur? Only those are not miracles, they are incontestable proof that we don’t know enough to codify how decisions should be made. The decision should belong to each individual, each doctor, in each particular instance, with millions of variations and permutations, and I thought that was what patient-centered care was supposed to be.
    So, no, as tempting as it may be, we cannot step away from the details. Only perfect science, or God (whatever your preference is), has the luxury of stepping away from details.

  21. My point was not that Medicare Stars is a form of risk sharing, but that it drives insurers to promote care coordination and paying for quality over volume. Those things in turn have led insurers to get more serious about ACOs and risk sharing.

  22. In the immortal words of Mammy from Gone With the Wind: Miss Scarlet, you can put a mule in a horse’s harness but it’s a mule just the same!

    Give physicians a known budget and information about the patient population, then let them figure out how to divide the pie. The only rule is, patients have to survive and not get sicker than they already are. Doctors are smart, they will figure it out.

  23. Four questions:

    1. Why is “everyone can’t go away from the poker game with winnings” wrong? So long as ACOs can reduce their variable costs more than their bonus payments they will come out ahead. (Well, a few hospital employees may have to be added to the jobless rolls, but they were never in the game.)

    2. Why are hospitals interested in ACOs? It’s a great opportunity to tie physicians more closely to hospitals, thereby guaranteeing referrals and admissions and strengthening their negotiating positions on rates. (And now that the final regs make beneficiary assignment prospective, the costs and risks are less.)

    3. Why is this bad? The pros of better integrated care will be outweighed by the cons of quasi-monopolistic hospital systems. (Pretty much like airline hubs that eliminate competition.)

    4. Why are private insurers interested in ACOs? Fear of being left out, I suspect, plus naïve optimism that hospital-dominated integrated care will be less expensive.

    5. Why is this bad? It’s a short-run tactic, and one that may divert insurers from more promising approaches, like controlling their provider groups.

    6. Why will ACOs make the system worse? See #3 and #5. (And, as Tcoyote points out, they are aimed at the wrong target.)

    (And is that Kathleen Sibelius at the left of the picture hiding behind the black beard?)

  24. If we took better care of ourselves there would not be so much of the chronic illness. I know there are those illnesses that we have no control over. Just think of this: How many chronic illnesses occur because of obesity? How many chronic illnesses occur because of smoking? How many chronic illnesses occur because of no exercise? How many chronic illnesses occur because of over medication? How many chronic illnesses occur due to aids?

    We have become a society that wants it all and then wants the ability to just “take a pill” so we can continue the same lifestyle. We have to take control of our destiny as much as possible. If everyone did, then a lot of good things would happen.

    I am not on a crusade, but I sure don’t like paying for those who abuse their bodies then whine because they are having big problems. If they had to pay as they go, it wouldn’t be as it is now in a few decades.

    I’d like to see major medical insurance only. (I confess I don’t have a definition of where that begins.) I think it would greatly encourage better health care individually and ultimately reduce premiums.

    If you don’t have any consequences for your actions, why change your behavior?

  25. Step back from the details for a moment. If you can’t give all possible care anyone might want to everyone all of the time, what do you do as an allocation mechanism? One method, in a society with extreme social cohesion, would be the British system, with private insurance as a safety net. Some on this blog, who have little sense of social cohesion, appear to favor care for those who can afford it and no care for those who can’t.

    In the U.S., managed care in the 1980s was an allocation system driven by the payers, and it caused a huge backlash. It was a perversion of the original prepaid group practice concept, in which groups of providers tried to make a fixed amount of money cover all needs. ACOs are provider run, but take on risk. They are local. These fundamental characteristics are why both Democrats and Republicans who favor market mechanisms but have a sense of social obligation (rather than single-payer or high-deductible solutions) and, frankly, realism rather than ideology, have favored ACOs. So do I. You can carp about monopolistic group practices or “give Mom all the care I would have if I’d ever visited her the last 20 years” patients, but the mechanism is fundamentally sound.

    The question is how much you pay and what kind of oversight you have. Will there eventually be risk-sharing for seniors? Sure. But even the most radical I-love-the-marketplace GOP candidate doesn’t seem to be calling for that, because ideology stops at the voting booth. Want to penalize obese patients? See how many votes that gets you in these overweight United States. Similarly, while I appreciate the concerns about antitrust, and they are legitimate, there are oversight mechanisms.

    Can the ACO concept fail? Sure. But what CMS has done with the final regs, which it failed abysmally to do with the draft regs, is to construct a program that is politically palatable to groups as diverse as the AMA and the AARP and will launch with a respectable number of participants and then can get fixed along the way. The one thing the Clinton and Obama health reform efforts taught us, and Paul Ryan and the GOP are learning, is that brilliant solutions that think tank folks may adore will never make it into actual practice.

    ACOs, as constituted, are a good start — and while they barely merit “good,” merit it they do.

  26. Medicare STARS is an updated version of HEDIS, not a move toward risk sharing. I respectfully disagree with Michael. Most of the payers who are moving toward ACO’s are trying to limit cost shifting from their most prominent local monopolies. The bulk of private insurance contracts won’t change because insurers do not trust providers to manage health cost risk, and given their track record,

    I don’t blame them. Even the vaunted Massachusetts Blue Cross Alternative Quality Contract, which bent over backwards to accomodate the variation in provider readiness, did not actually slow the growth in their costs.

    There may be a “new world” out there, but the ACO probably isn’t in it.

  27. Not everyone gets islet cell cancers. It appears that Jobs first went the alternative medicine route. Good chance he might have had a cure if he had not.


  28. Whose millions? If everyone had the same care under PPACA as Mr. Jobs had, there are not enough millions to pay for it. It would not have happened.

  29. Jonathan H. –

    I agree that many people will choose more conservative treatment if all of the options, risks and benefits are explained to them and there is an ongoing tread toward greater use of hospice care at the end of life. However, only about 25% of people have a living will or advance directive and the default protocol is to do everything to keep them alive.

    When I talk to people about end of life care generally and suggest that expensive and futile care is provided or demanded too often, the response I often get is that I wouldn’t feel that way if it were MY loved one. I would want everything done then. Well, no I wouldn’t.

    Perhaps some of the docs on the blog could comment as to whether they have seen any decrease in demand for aggressive and expensive care at the end of life when it’s unlikely to do much good. With more treatments available now, especially expensive cancer drugs, I suspect that demand may be higher than ever. I also don’t know how you get doctors to have the difficult conversation with patients and their families more often even if providers are fully and fairly paid for their time to do so.

    In the case of the cancer drugs specifically, it would probably be easier if Medicare just refused to pay for them if the costs outweigh the likely benefit but current law precludes Medicare from even taking cost into account in deciding what to pay for and not pay for. That has to change too.

    By the way, second part of the Religion and Ethics News Weekly series airing tomorrow will be about living wills and advance directives as an approach to limit often unwanted end of life interventions.

  30. Really, you all have to see this in a media presentation to figure it out!?

    Denial and selfishness is pandemic, isn’t it!?!?

  31. Keeping just to topic, the most important question is how does any make extra money? Someone has to lose for someone to gain?

    Let me try my take through a hypothetical example. Let’s say I discover a magic pill that cures all diseases and cost is moderate.

    Will the overall healthcare cost decline? My answer is, yes, but it will not be immediate. Costs will decline after there is dismantling of the fixed cost structure that someone has to pay. There will be no need to surgeries and Xrays etc. So someone will lose. That money not spent on healthcare will go elsewhere and that industry will boom.

    Specific to ACO, it could help better provider earn more, which is definitely need of the day. Absence of meritocracy really hurts healthcare.

  32. Excellent question. It is up to the ACOs and insurers to makes sure it does look different, and they had better remain aware of the need to do so.

  33. Barry, there is a fair amount of data out there showing that when American patients are told of the real risks and benefits of different treatment options, they tend to choose more conservatively than doctors expect them to (and choose more conservatively than doctors push them to as a default). In fact insurers know that one strategy to lower end of life costs is to find a way to get that conversation about comparative real risks going. It’s hard for them to do, though.

  34. Margalit,

    People die every day. Their funerals are not public expense. Why not with your values? Why not have society pick up the costs of their elaborate burials, too? They will demand it if they can.

  35. The incentives in traditional Medicare’s ACO program may indeed be inadequate by themselves. However traditional Medicare will not be alone. Private payers, as Michael states, are moving in this direction. The Medicare Stars program is one push toward ACO-like arrangements, and commercial value-based contracting is another.

    As for southern doc’s jibe about why private payers are moving in this direction, I would just say this: the writing is on the wall. We cannot continue to pay for volume in an undisciplined way and let health care costs continue to outpace GDP growth by 2% a year. I don’t mean this “cannot” in a normative sense, but in a factual sense. That which cannot continue to rise, won’t. So insurers are preparing to survive and thrive in the new world.

  36. Mark, people going to the doctor with a cold is overkill, I agree. But that is maybe 1% of health care spending. I hope you are aware by now of where the bulk of money is spent: hospital care and chronic disease management. Also, we spend twice as much per capita as other developed nations but that has almost nothing to do with our being less healthy. We are only slightly less healthy than comparable nations when you consider everything (like smoking rates) and in any event living longer does not necessarily reduce health care expenditures. The blog post right before this one from the doctor about Medicare reform hit the target better about why and where we overspend.

  37. Margalit –

    In fairness, the show segment that I mentioned started with a family member talking about a relative dying of cancer. The family just wanted comfort care and quiet time with their loved one toward the end. However, Memorial Sloan Kettering doctors kept calling recommending additional treatments and interventions because that’s their culture – to treat aggressively. So, it goes both ways. You can find the segment online if you’re interested in viewing it.

    Cancer is generally characterized by a very rapid decline toward the end. Doctors can recognize this fairly easily. Yet, there are lots of treatments, including surgical interventions, recommended because many oncologists view it as a personal failure if the patient dies. The fact that providers are paid more to do more under a fee for service payment model contributes to this bias.

    In the case of patients with severe dementia or Alzheimer’s who can no longer recognize family members or communicate, I don’t see why any interventions should be offered or performed unless it is to relieve pain. Often, though, in the absence of a living will or advance directive, it’s the adult children who have not yet come to grips with their own mortality who instinctively can’t let go and want the doctors to “do everything” regardless of cost even when the likely benefit is minimal. The culture needs to change among both patients and providers and moving away from fee for service payment in favor of capitation or bundled payments would be helpful, I think.

    I do not, however, think CEO and other senior executive compensation is a material factor in driving up healthcare costs. If the top 25 executives of all insurers all worked for free and the savings were passed on in lower premiums, it would be a rounding error. Besides, much of public company executive compensation is in the form of stock options and restricted stock awards which are paid for by shareholders in the form of earnings per share dilution. They are not built into the price of the product like cash compensation is. Hospital executive compensation is also a minimal percentage of total hospital revenues.

    The bottom line is that there is much more money to be saved by cultural changes in attitudes among both patients and providers around high cost, low value utilization than in reorganizing how care is delivered by forming ACO’s or more widespread use of electronic medical records. I think the other developed countries are more rational about this than we are. You can call it rationing if you like. I call it common sense.

  38. Barry,

    First, I am not surprised that a hospital representative would say that patients are the ones demanding futile care. I have been asking here for a very long time, where is the data to support this assertion? It cannot be that hard to run an observational study on terminal elderly patients and find out. All this futile care that patients supposedly demand, is a cash cow for hospitals.Shouldn’t we find out what really transpires there before we blame patients?

    Second, is “the personal responsibility to not impose unreasonable demands, expectations, and COSTS on their fellow society members and taxpayers” expected just from patients, or does it have broader scope inclusive of captains of the industry and their institutions, who seem to have no inhibitions when it comes to imposing COSTS on all of us?
    I actually have more sympathy for desperate souls imposing costs when they try to save their very lives, than for greedy individuals imposing costs for fun or sport or whatever drives these types of people.

  39. Regarding MD as Hell’s comments on end of life care, last weekend, the TV show “Religion and Ethics News Weekly” aired the first of a two part series on this subject. BIDMC’s Director of Bioethics and Palliative Care, Dr. Lachlan Forrow, told the interviewer, Betty Rollin, that seniors or their family members often ask for expensive and futile treatment at the end of life and usually implicitly but sometimes explicitly tell doctors and hospitals to not worry about the cost. He went on to note that at a conference on end of life care in the UK a few years back, an audience member asked one of the UK experts how they respond when a patient or family member demands expensive but futile end of life care. With a somewhat bemused look on his face, the expert responded, “they don’t demand.” It doesn’t happen in the UK. Apparently, part of the notion of solidarity in the UK includes the personal responsibility to not impose unreasonable demands, expectations, and COSTS on their fellow society members and taxpayers.

    While I’m no fan of the single payer approach to healthcare and health insurance, I think Americans need to rethink their expectations, especially when society is paying. If they wouldn’t be prepared to spend their own money on futile care even if they had it, they shouldn’t expect taxpayers or insurers to pay either. We all need to learn to care about costs even when insurance is paying.

  40. .The crucial change needed was to make the rewards more generous, which they did not do. The reduction in the number of quality measures isn’t going to change the cost side of the cost-benefit equation very much, so the risk/reward ratio for a rational actor still isn’t worth incurring the $15-25 million set up costs.

    This was a negotiated settlement, I suspect, with Premier, to get a large enough number of their first tier (e.g. fired up and ready to go) hospitals to try this The new regs basically permit the Administration to avoid embarrassment; they don’t salvage a fundamentally flawed concept poorly framed.

    ACO Program is still a turkey. It isn’t a randomly selected population of 10-20 thousand beneficiaries where the rewards are. Even focusing on the sickest 15% of their Medicare patients, MGH’s “Care Management for High Cost Beneficiaries” demo only produced a net savings of 5% after set up costs on $58 million in spending.

    It is focusing on the most seriously ill subgroups in the Medicare population where the health system ought to be concentrating its attention. The lack of a plan and focus in CMS’ Innovation Center is getting embarrassing. It just seems like Brownian motion, not a co-ordinated strategy

  41. ” more transparency and accountability for quality of care measures than in the old days.”

    True, but is that what patients will pick up on?

    Or will it be: “No, you can’t go to the specialist. And you can’t see Dr. X any more, you can only see Dr. Y’s PA.”

    Just wondering.

  42. How are ACOs different from capitation? Run by docs and hospitals (at least in Medicare, by law) and far more transparency and accountability for quality of care measures than in the old days.

    Of course, no system — including, obviously, unrestricted fee-for-service and even salaries — is free from possible abuses. On the other hand, Mark’s idea — no insurance — addresses those issues by substituting ambulance services (for carting off bodies of the undeserving poor) for medical services. “Take care of yourself” is good advice, it turns out that growing old causes illness even to those in the best of physical shape. See: Steve Jobs.

  43. Who says that anybody is “worthy” of all this? Just a scant 50 or so years ago most of the world didn’t go to the doctor with a sniffle. Now we think we “have to have health insurance.” What ever happened to taking care of yourself so you didn’t have to go with a sniffle because you very rarely got them or if you did you just lived through it.
    Everybody is too ……pampered and we think we have to have it all. Spoiled might be a great word to use.
    Quit whining and do something constructive like taking care of yourself.

  44. And from the patient’s point of view, will this look any different from the much-beloved capitation, with its limits on procedures and access to specialists?

  45. Good points about the “less money,” so here’s the implicit assumption: if you do fee-for-service, we’re going to ding you in so many different ways, that you’re better off going to bundled payment, getting good at it and use that expertise to win in the marketplace tomorrow.

    Clearly, this doesn’t work for providers unless “do more, get paid more, unlimited budget” is perceived as coming to an end. As for the insurers, what’s coming to an end for them is “prices go up, charge an admin fee off the total and rake it in,” hence their eagerness to diversify (and don’t think that ACOs are a big profit center right now — it’s also a hedge bet on the future).

    The proceduralists lose, the mark-it-up-and-sell-it pharma and drug company and insurance company business models lose and the “give me everything I see on TV” patients lose.

    But it remains a win-win-win for good patient care, prudent stewardship of insurance premiums and giving patients safe and coordinated care.

  46. I’m still looking for that poker game where everyone goes home with more money than they came with!

    “they’re a big priority for insurers like Aetna and UnitedHealth Group”

    And does anyone think that they’re interested because ACOs are a great way to reduce their profits?

  47. “Unit prices are not rolling back.”

    Is that a law of nature?

    I agree with southern doc’s comment:

    “Somebody has to wind up with less money in their pocket at the end of the day.”

    It’s just simple math, but are seniors the only high rollers out there? How about insurers with their obscene CEO salaries? And hospitals with their entirely contrived pricing? And proceduralists churning out hundreds of “things” just because those pay well?
    And yes, those tubes and scooters too… are they demanded by, or inflicted on, patients most of the time?

  48. Fool me once, shame on you,

    Fool me twice……….

    The people that need to ante up are the seniors. They have more wealth than any other group. Medicare is not supposed to be inheritance insurance.

    They need to give up futile feeding tubes, scam scooters and futile end of life care.

    They need to give up unlimited discretionary spending.

    They need to quit coming to the ED because their grandaughter from out of town doesn’t like the way grandma looks this year.

    If you don;t change the demand from seniors, you get no difference. Unit prices are not rolling back. They need to consume fewer units, and they need to pay more per unit out of their own pocket.

  49. ” get reimbursed at a higher rate for providing better-quality, lower-cost care. It’s supposed to be a win-win-win for providers, patients and taxpayers”

    Sorry, not possible.

    Somebody has to wind up with less money in their pocket at the end of the day.

    Who volunteers?