Saving Medicare Through Accountable Care Organizations: It’s A Long, Long Way to Tipperary

The primary purpose of accountable care organizations (ACOs) is to save Medicare by cutting costs for sick seniors. Medicare now costs $500 billion. It will pass $1 trillion by 2019. ACOs are the darling of policymakers. They see ACOs as a the primary mechanism for restructuring Medicare through increased efficiency and quality and “accountability” on part of physicians and hospitals.

According to the government, An accountable care organization is an health system that pays doctors and hospitals, to keep people well, when they're sick. This may seem like a contradiction. But it is not. Chronically ill patients – with heart disease, hypertension, diabetes, emphysema, and cancer – consume more than 60% of the Medicare budget.

Theoretically, if you could prevent these conditions, or minimize complications once the disease horse has left the barn on an outpatient basis through teams of primary care doctors and their helpers , you could keep the sick elderly out of the hospital, out of the hands of specialists, and out of Medicare’s pockets.

ACOs can be defined as integrated groups of physicians and hospitals providing care for Medicare patients. ACOs is the latest buzzword for managing Medicare. It is gaining traction among policymakers desperate to control costs and boost quality. The incentive for physicians and hospitals is to share the savings produced by ACOs.

In 2009, the Medicare Payment Advisory Commission (MedPAC), Congress’s Medicare-policy advisory arm, identified ACOs as a tool for restructuring Medicare . A group of physicians , usually including a hospital, would assume responsibility for annual Medicare spending for a defined patient population.

ACOs would be compensated through an arrangement combining traditional fee-for-service payments with financial incentives to reduce costs, improve quality, and achieve greater information transparency. The success of the model would depend on adopting clear quality standards combined with a payment methodology that rewards quality while reducing current financial incentives for uncontrolled practice and volume expansion.

So Much for the Rhetoric

So much for the rhetoric, now for the reality. How would ACOs work?

Theoretically, organizations exist that could easily qualify as ACOs.

These include:

• professionals in group practice arrangements;

• networks of individual practices of professionals;

• partnerships or joint venture arrangements between hospitals and professionals;

• hospitals employing professionals;

• other groups of providers and suppliers of services that the Secretary deems appropriate.

And what would these groups have to do to qualify as ACOs?

• Agree to provide care for a defined population of Medicare fee-for-service beneficiaries;

• agree to participate in the program for at least three years;

• have a formal legal structure allowing it to receive and distribute payments for shared savings;

• include enough primary care professionals to cover the Medicare beneficiaries assigned to it;

• have in place leadership and management structures that include clinical and administrative systems;

• define processes to promote evidence-based medicine and patient engagement;

• demonstrate to the government that it meets patient-centeredness criteria.

And what are the obstacles to implementing a system of ACOs?

• Number One, it would require plenty of capital – for consultants to set up the administrative structures, lawyers to make sure it doesn’t violate antitrust rules, managers to define the processes for practicing evidence-based medicine and engaging patients. Capital is something most physicians do not have.

• Number Two, because of the time required to surmount the bureaucratic barriers, physicians, whose incomes coming from seeing patients rather than attending meetings, would likely to be on the sidelines.

• Number Three is simply dealing with the ponderous federal bureaucracy. CMS claims it will work closely with the Agency for Healthcare Research and Quality to develop pilot quality measures , the Office of the National Coordinator for Health Information Technology on criteria applicable to health-information and meaningful-use capabilities, and the Health Resources and Services Administration on developing ACO criteria for entities operating in or serving medically underserved communities.

• Number Four is a host of other things, such as
establishing ACO qualification, dealing with federal antitrust authorities, meeting state insurance regulations, establishing payment methodologies, safeguarding patients against abuse, getting multiple doctors and payers to participate, standardizing performance measurements, and selecting and expanding pilots.

It’s a long, long way to Tipperary – and to a widespread system of accountable care organizations caring for exploding Medicare and Medicaid populations.

Meanwhile the federal bureaucratic monster will be on the prowl, concocting new ways to “restructure” medicine to “save” Medicare.