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MedPAC on ACOs

By July 16, 2014Commentary

The Centers for Medicare and Medicaid Services has plunged into the accountable care organization waters with a half-assed “pioneer” program that has certain ludicrous features, like a weird beneficiary “attribution” method.  It has coupled the ACO initiative with a “shared savings” program that also has problems.  The Medicare Payment Advisory Commission, which usually has excellent analysis and recommendations, send CMS a letter suggesting improvements to these programs.   (MedPAC Letter)   In regard to ACOs, the Commission identifies two primary problems.  One is the beneficiary attribution method.  CMS in its wisdom has not required beneficiaries to actually sign up for an ACO and have that ACO be responsible for delivering and/or coordinating most of the beneficiary’s care.  Therefore, it has to use claims data to try to decide who uses the physicians in a particular ACO, and the method doesn’t currently consider the use of providers other than physicians, although many beneficiaries receive primary care from nurse practitioners or physician assistants.  This means that the ACO doesn’t really know who it is responsible for and can’t actively engage patients in their health maintenance and care.  Prospective attribution, instead of the retrospective method used now, may help some, but attribution is a poor substitute for a beneficiary knowing that they must have care managed by a specific ACO.  A second issue is the usual complaint about CMS’ quality programs–they are expensive to comply with and they don’t actually measure meaningful outcomes, focussing instead on process.  Using more pure health outcomes measures would itself lessen the costs of collecting and reporting the data.

The shared savings program can be two-sided, but most ACOs have chosen only to share in the upside.  This is understandable given that they don’t even know who they are responsible for and they don’t have the flexibility to manage these patients without regard to the usual Medicare rules.  To truly incent providers to render cost-effective care, they need to know what patients they are responsible for, they need to be able to manage those patients according to their best judgment, without regard to the usual fee-for-service reimbursement requirements and they need to know that they will not only share in any savings they create but also in downside performance.  The Commission identified other features of the shared savings program that may cause ACOs difficulties, including the construction of the benchmark.

The real solution in my judgment is to treat ACOs as another variant of Medicare Advantage plan.  These plans have shown a tremendous ability to lower costs, maintain or even improve quality and still make money for their sponsors.  Properly established and operated ACOs could be another MA option, with the beneficiary enrolled in the ACO and accepting management of his or her care by that organization; and the ACO receiving the MA payment as full compensation for the beneficiaries’ care.  Trying to operate an ACO program under the fee-for-service side of Medicare is almost certainly doomed to fail.

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