Heath Reform: Sticks, Stones, Carrots, and Accountable Care Organizations

May 19, 2011 - When the Centers for Medicare and Medicaid released its rules for Accountable Care Organizations on March 31, 2011, the reaction among hospitals and physicians was almost immediate, and it was negative.

Simply put, providers said the government proposal for ACOs was “unworkable “– too bureaucratic, too expensive, too time consuming, too threatening to fee-for-service medicine,and too risky because of the Department of Justice’s anti-monopoly provisions.

Even integrated organizations – Scripps, Mayo, Geisinger, and Aurora – thought by government and pundits to be made to order for ACOs, objected and said they wanted no part of ACOs.

Chris Van Gorder, President and CEO of Scripps, said, “Frankly, I was surprised. I thought there would be more sticks, not such carrots.”

Nick Turkel, President and CEO of Aurora in Milwaukee, chimed in,”We had been very excited about the concept of ACO and Aurora has been designed around the concept. But the plot as designed by CMS doesn’t match with what we expect, and we don’t think it matches with what a lot of providers expected across the country.”

On May 17, The Obama administration blinked, even retreated. It announced three new initiatives under under intense criticism when Mayo, Geisinger and a host of others told the government proposed ACO regulations were too stringent and too costly for them to participate.

The new ACO initiatives, widely interpreted as government carrots, included:

• A Pioneer ACO Model aimed at organizations that have already started coordinating care for patients;

• An Advanced Payment ACO Initiative that would allow certain participants in the program to get part of their expected savings up front to invest in care coordination;

• Free Accelerated Development Learning Sessions to help providers learn how they can improve care delivery and coordination.

CMS Administrator Donald Berwick, MD, said the new accountable care organization initiatives announced on May 17 were not prompted by widespread concerns that proposed ACO rules would be unworkable.

CMS, he insisted, would “stand firm” on ACOs, which were the “key” to overhaul of the health system. The government, he seems to saying is flexible at the margins, but inflexible in its core beliefs, just as it was when it issued 1372 waivers. The government will bend, it will try to make ACOs more workable, but it will not yield on its principles or the basic ACO concept.

Maybe so. But CMS seemed to have concluded: sticks and stones might break the bonds of hospitals and doctors, and carrots might prevent a fracture.