Medicare “Accountable Care Organizations” (ACOs): “Invisible Enrollment & Invisible Cost Reduction” ($5 billion Savings on $6 Trillion Cost Isn’t a Viable Plan)…

Thoughts About ACO’s (As Summarized/Defined In “Health Affairs” 8/2010)

• The assertion (and regulatory definition) that ACO’s can be “successful” under any organizational structure (i.e. the five formats described in the article) means that they are everything and nothing. Being everything and nothing has rarely been a formula for successful ventures of any kind.

• The hardest and most complex part of financial realignment, the definition of “savings” as compared with other ACO’s or non-ACO’s has been the conundrum of health care cost improvement policy since the 1970’s. There is no advancement in the intellectual, clinical, or financial basis of “paying for quality” or “paying for outcomes” as a result of a new name for old vague ideas.  How to measure and then reward “savings,” or “quality,” or “outcomes,” has been the challenge for forty years. Nothing about the ACO concept makes these ideas any more practically feasible versus past names for what is the same idea.

• Scaling the degree of financial risk/reward based upon the “preparedness” or state of  “integration” is obvious, except for the fact that it hasn’t proven to be an indication of success in past attempts, and the most integrated systems are also often the most expensive (albeit perhaps the highest “quality).  Capitation hasn’t worked for large integrated systems any better than it has for IPA’s. If scaling financial risk mattered, capitation would have worked better for large integrated systems; it didn’t.

• Getting private payors to be excited about anything other than selling their administrative capacity to support ACO’s (i.e. endorsing them because they think ACO’s will actually slow cost increases) isn’t supported in the summary of the pilot program success with Medicare. “Mixed results,” with excuses/explanations why it didn’t result in cost-savings isn’t a glowing endorsement that provides private payor rationale for investment in ACO development.

• Private payors will never:  “…cooperate in promoting ACOs. Since the 1970’s, it has been obvious that: “Providers may be more likely to modify their practices if most of their patients—not just those with one type of coverage—are included in the ACO population. Efforts to improve care may be more effective if several payers are using uniform performance measures and quality standards. And a multipayer ACO may have enough patients to allow a meaningful focus on populations with special needs.”
This is so obvious as to be trite. Duh. But it ain’t gonnahappen. Never has; never will.

• CMS says Medicare payments in 2009 were $502 billion. At a 4% annual increase rate, this means annual costs will be $565 billion in the first years of Medicare’s ACO promotion. ACO advocates claim “…$5 billion in savings over the first eight years of ACO implementation.” That’s 2012 through 2020. Using the 4% annual growth rate in Medicare expenditures, those eight years of benefit payments will total nearly $6 trillion dollars. So the proponents of ACOs project that their implementation will reduce Medicare expenditures by 0.08%. Not very exciting, is it? Everett Dirksen may have been correct in the 1960’s, but “a billion here and a billion there…” doesn’t add up to real money when dealing with Medicare costs of the early 21st Century.

• All health policy followers universally accept that without risk adjustment, the 1980’s “Medicare HMO” shared savings formula (pay the HMO 95% of per capita average costs, thereby saving 5%) is very flawed, and likely actually increased costs in the system. Thirty years later, ACO proponents want to implement the same thing: “A spending benchmark will be set for each ACO, based on its assigned beneficiaries’ past Medicare expenditures. The ACO will be deemed to have achieved savings if it keeps spending growth for its population be low average per capita spending growth for all Medicare beneficiaries.”

• It’s hard to fathom that the following is being advanced as a new idea: “an arrangement under which highly integrated care systems would assume the full financial risk of providing some range of Medicare services (such as all physician services, or all services under Medicare Part B) in return for a fixed monthly payment per beneficiary. Another option would be “risk corridors,” under which the ACO’s potential for profit or loss would be limited.” What is new about this concept? “Invisible enrollment?” Yeah, that will make ACO’s work much better than Medicare HMOs/Medicare+Choice/Medicare Advantage. Sure. Right. And I can sell you the Brooklyn Bridge…

• In my opinion, intellectually honest healthcare delivery system and policy wonks would see ACO’s (at least as summarized in Health Affairs as of July, 2010) as lipstick on a pig. What’s going to make this idea work better now than in the past? On-line data access? Remote chronic disease monitoring? The Dartmouth Center thinks ACO’s are a new approach?

At least their proponents seem to be honest in savings projections. $5 billion savings out of $6 trillion in costs. Break out the Champagne; we’ve solved the Medicare fiscal crisis with a new three-letter program: Accountable Care Organizations…Not.


About Benjamin D. Zelman
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