Accountable Care Organizations; Die, Die, Die!!

The Final rule making regarding ACO’s (Accountable Care Organizations) was released in March. Since then, no further detailed information has emerged. It appears to be an almost identical version of what was originally released in the ACA. I can’t understand why it took so long for people to review and begin digesting the ACO model. In some regards it has the appearance of the capitation models of old. In other respects it appears to be a new variation of that old theme, with some nuances thrown in for good measure. Either way you look at it, it needs to die.

The main goals of the ACO is their “three part aim; (1) better care for individuals; (2) better health for populations; and (3) lower growth in expenditures”. Overall the majority of the “aims” of the ACO are to maintain budget neutrality for Medicare or produce cost savings that can be placed back into Medicare coffers. One additional proposal, that will more than likely be implemented, and may be mandatory for participation, is the idea of a “two-sided cost saving, risk-sharing model”, that is most assuredly one-sided.

Quoting the ACO final rule : (Further excerpts at the end of post)
“++ Providers should be accountable for the cost of care, and be rewarded for reducing unnecessary expenditures and be responsible for excess expenditures.
++ In reducing excess expenditures, providers should continually improve the quality of care they deliver and must honor their commitment to do no harm to beneficiaries.
++ To the extent possible, and recognizing differences in payers’ value-based purchasing initiatives, providers should apply cost reducing and quality improving redesigned care processes to their entire patient population”.

I take all of that to mean that physicians should continue to provide high quality care while utilizing fewer resources. Or in simpler terms: rationing. While providers are supposed to work harder to provide more, they are also supposed to be paid less. AND, while being paid less, they are going to “share” that saving with Medicare. With less than 6 months to go until its implementation, no one, even Medicare, knows what those numbers are. And Medicare is asking providers to volunteer to participate in a huge, unknown black hole!

Specifically, there are many unknowns when calculating savings and payments to an ACO. First, how much would normally be spent in a fee for service environment for the group of patients assigned to an ACO? Second, If the ACO spends less than expected, what is the threshold amount before HHS would consider that to be an actual savings and not a statistical variation? Third, once that saving has been verified, what percentage goes to the ACO and how much back to Medicare? Fourth, why would Medicare place a cap on the amount of saving an ACO can be paid? Fifth, how can an ACO have full financial control and responsibility over its “members” when they are still free to see any physician they wish, whether in the ACO or not?

Sounds to me like a very bastardized form of capitation where there is increased work, documentation, reporting, limited reward for all the effort expended, unlimited risk and responsibility on the part of the ACO or providers and the ONLY risk to Medicare, at the very greatest, is to pay what they have always paid under the fee for service model.

In the simple capitation model, a group was assigned a certain number of patients or the insurance company calculated how many of their members were patients of a given practice. Then, the HMO calculated a rate per covered life and paid that to the practice. All of the care provided to the entire group was to be covered by that payment. If the provider spent less than they were paid, they made money. If they spent more, they lost money.

All the patients were required to use that provider, but there was an open enrollment period to change if they wished. In this scenario, if the provider managed resources well, and you had a moderately health patient base, it was profitable. The major risk occurred when a practice or group had one or two very ill patients that needed, say extensive chemotherapy, an organ or bone marrow transplant. In either event the reward and the risk was the practice’s to assume.

I actually worked as a student aid during college for the federal government. Each fall as the end of the fiscal year approached, the administrative head of each department would come around and announce how much money was left in the budget that had to be spent by September 30. Why? In the world of government, savings was never rewarded. If a department spent less than budgeted then their budget was cut the following year by the amount of saving. Experience had taught us all that just because you are able to spend less one year doesn’t mean you’ll have the same luck the following so it was best to maintain your current budget and spend, spend, spend. Sound familiar?

If this holds true in the ACO environment (and there’s no reason to think the government is any better at managing money now), and a group of providers does save money caring for patients, what do you think the chance are that their “budget” for the following year will be reduced by the amount of their savings? That is to say that their new budget will be their old budget minus the savings they produced. They have to perform as well the following year even if their patients become more ill, consume more resources, or reimbursements decrease. AND if they go over budget, it is their responsibility to pay it back to Medicare!! Who is assuming all the risk? There is no such thing as risk sharing under the current ACO guidelines.

Simpler still, why would anyone volunteer to have their income reduced, workload increased and savings garnered in an environment where they have no control over the lives they are legally and financially responsible for? The current fee for service system seems like a much better way on all fronts, at least from my point of view given the current suggested ACO model. HHS and Medicare both acknowledge that in order for ACO’s to work, the majority of saving will occur on the hospital side of the equation. Without their participation, it doesn’t really matter whether the physician providers are on board or not. In my community, NONE of the hospitals are planning on voluntary participation in any ACO model. Sounds like they’ve figured it all out already. ACO’s are a long term losing proposition.

Obama wants shared sacrifice? Die ACO, die. Come up with something more reasonable and equitable.

Doc B

My opinion is free.
Advice is worth exactly what you pay for it.

++Section 1899(a)(1)(A) of the Act further provides that,”groups of providers of services and suppliers meeting criteria specified by the Secretary may work together to manage and coordinate care for Medicare fee-for-service beneficiaries through an [ACO]”. Section 1899(a)(1)(B) of the Act also provides that ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for “shared savings”.

Specifically, sections 1899(b)(2)(A) through (H) of the Act provide, respectively, that eligible groups of providers of services and suppliers must meet the following requirements to participate in the program as ACOs:

• The ACO shall be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service (FFS) beneficiaries assigned to it.
• The ACO shall enter into an agreement with the Secretary to participate in the program for not less than a 3-year period.
• The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers.
• The ACO shall include primary care ACO professionals that are sufficient for the number of Medicare FFS beneficiaries assigned to the ACO. At a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it in order to be eligible to participate in the Shared Savings Program.
• The ACO shall provide the Secretary with such information regarding ACO professionals participating in the ACO as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements, and the determination of payments for shared savings.
• The ACO shall have in place a leadership and management structure that includes clinical and administrative systems.
• The ACO shall define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies.
• The ACO shall demonstrate to the Secretary that it meets patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans.

Section 1899(d) of the Act establishes the principles and requirements for payments and treatment of savings under the Shared Savings Program. Specifically, section 1899(d)(1)(A) of the Act provides that, subject to the requirements concerning monitoring avoidance of at-risk patients, payments shall continue to be made to providers of services and suppliers participating in an ACO under the original Medicare FFS program under Parts A and B in the same manner as they would otherwise be made, except that a participating ACO is eligible to receive payment for shared savings if the following occur:

• The ACO meets quality performance standards established by the Secretary;and
• The ACO meets the requirements for realizing savings.

Section 1899(d)(1)(B) of the Act establishes the savings requirements and the method for establishing and updating the benchmark against which any savings would be determined. Specifically, section 1899(d)(1)(B)(i) of the Act establishes that, in each year of the agreement period, an ACO shall be eligible to receive payment for shared savings only if the estimated average per capita Medicare expenditures under the ACO for Medicare FFS beneficiaries for Parts A and B services, adjusted for beneficiary characteristics, is at least the percent specified by the Secretary below the applicable benchmark. The Secretary shall determine the appropriate percent of shared savings to account for normal variation in Medicare expenditures, based upon the number of Medicare FFS beneficiaries assigned to an ACO. Section 1899(d)(1)(B)(ii) of the Act, in turn, requires the Secretary to estimate a benchmark for each agreement period for each ACO using the most recent available 3 years of per beneficiary expenditures for Parts A and B services for Medicare FFS beneficiaries assigned to the ACO. This benchmark must be adjusted for beneficiary characteristics and such other factors as the Secretary determines appropriate and updated by the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original Medicare FFS program, as estimated by the Secretary. Furthermore, the benchmark must be reset at the start of each new agreement period.

Section 1899(d)(2) of the Act provides for the actual payments for shared savings under the Shared Savings Program. Specifically, if an ACO meets the quality performance standards established by the Secretary, and meets the savings requirements, a percent (as determined appropriate by the Secretary) of the difference between the estimated average per capita Medicare expenditures in the year, adjusted for beneficiary characteristics, and the benchmark for the ACO may be paid to the ACO as shared savings and the remainder of the difference shall be retained by the Medicare program.

The Secretary is required to establish limits on the total amount of shared savings paid to an ACO. Incorporation of downside risk into the Shared Savings Program, while retaining a FFS base, has been encouraged by commenters on the November 17, 2010 RFI (including MedPAC), other stakeholders and policy experts as an entry point for moving ACOs to risk-based arrangements. MedPAC suggested offering a two-sided risk model in addition to the one-sided model, and over time, making the two-sided model the dominant or only option available to program participants. Further, to encourage ACOs to participate in the two-sided model, MedPAC recommended that it could be distinguished from the one-sided model by features such as a larger share of savings and risk corridors to protect ACOs from high levels of losses.


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