To put it simply, an ACO is a form of HMO. The idea is to better coordinate patient care among health care providers thereby improving quality and lowering costs.
ACOs are one of the key initiatives in Obamacare to control the cost of Medicare. The law encourages the development of ACOs and provides for a shared savings program, so to the extent the ACO saves Medicare money it receives part of those savings as a bonus. Medicare will also make advance payments to ACOs giving them capital to form and operate, hoping to recoup the money from the future shared savings.
HHS has high hopes for Accountable Care Organizations, perhaps too high. It seems the optimistic assumption is that the fact an ACO has formed immediately changes the practice of medicine and saves money. Consider this January press release.
Doctors and health care providers have formed 106 new Accountable Care Organizations (ACOs) in Medicare, ensuring as many as 4 million Medicare beneficiaries now have access to high-quality, coordinated care across the United States, Health and Human Services (HHS) Secretary Kathleen Sebelius announced today.
Before you are turned off by the reference to an HMO, there are significant differences between today’s version of the ACO and a traditional HMO.
Medicare beneficiaries will be assigned to an ACO if they use doctors who have formed such an organization. However, they may not even realize such assignment has happened and they are not prevented from obtaining care from a provider outside the ACO. There is no requirement to seek advance approval for such a visit or any visit for that matter.
Doctors and other providers who are part of the ACO must post a notice to that effect in their offices. Providers must also ask permission of Medicare beneficiaries to share their medical information and obtain it from Medicare.
Contrary to some news reports, health care providers in Medicare ACOs are still paid on a fee-for-service basis just as they were before organizing an ACO.
In concept, one cannot argue with this idea. After all, lack of coordination of care is one of the unnecessary cost drivers not only for Medicare, but all health care.
On the other hand, as currently designed, the Medicare ACO has several things working against it. The fact that patients are not involved in the process limits its effectiveness. Allowing patients to seek care anywhere while holding the ACO provider accountable for all costs incurred by the patient seems a serious flaw. Obtaining approval to receive a patient’s health care information also presents challenges because to the extent this approval is denied the ACO is still responsible for the patient, but with greatly limited ability to manage care.
Two things devalued the HMO; restrictions on patients seeking care and physicians who operated under the premise of business as usual. ACOs will still have to deal with the latter. Is it reasonable to assume that simply upon the formation of an ACO that providers will change their methodology developed after years of practice? An ACO may have scores, if not hundreds of physicians and many other providers. While they will share patient information, that does not mean that all that information will be used by each individual or facility with optimum efficiency? That’s a tough, really tough change to make work. And then we have the question of skin in the game as they say. Consider this from NewJersey spotlight:
None of the New Jersey ACOs are taking any financial risk; they will share in the profit if CMS saves money, but won’t lose money if efficiencies fails to materialize. Elsewhere in the country, ACOs are opting to take some risk in exchange for a higher share in the profit.
Finally, there is the simple idea of saving money. We should never forget that when money is saved in health care, that money is coming from someone’s pocket. For an ACO to save Medicare money it must spend less money. If it spends less money that means there is less revenue for the ACO members. So, the key question is, can the shared savings generated for Medicare offset the lower revenue ultimately resulting from providing fewer and more efficient services to the Medicare ACO beneficiaries?
You can be sure that the ACOs will do the math after receiving their first shared savings payment. There is also the possibility that lower revenue from Medicare patients will be offset by higher revenue from other patients.
Is the ACO a good idea? For the Medicare patient seeking the most efficient care possible, it should be a good idea. For health care providers the answer is yet to come. Will the ACO save money for Medicare? Perhaps, but only if changes in the practice of medicine become ingrained in the system on a lasting basis and only if patients cooperate in the process. Will ACOs save money in total for the health care system? That is the $64,000 question and the only one that really matters. Ask your doctors and hospitals if they are ready to accept a 5% of so cut in revenue.
As with most of our efforts at health care reform, success in lowering costs for everyone, (as opposed to shifting costs) and improving quality will not be known for many years.
QUINNSCOMMENTARY 