Dartmouth Drops ACO: a Crowning Blow for CMMI

An ObamaCare administrator has dubbed the Center of Medicare and Medicaid Innovation (CMMI) as “the jewel in the crown of health care reform.”

A Tarnished Crown

The crown just got tarnished as the Dartmouth Hitchcock Health System announced it was dropping out as the lead  member of the Pioneer Accountable  Care Organization (ACO).

The Problem

The problem is this:  a team from Dartmouth advanced the idea of ACOs in a 2006 Health Affairs article as an innovative way to generate  “savings” for Medicare by inducing doctors and hospitals to collaborate and cooperate.    Presumably, by replacing the disjointed fee-for-service system,  ACOs would not only save money but allow doctors and hospitals to share the savings.  

ACOs Not Working as Planned

Sadly, these “savings” aren’t, for the most part, working out well, even though Medicare now has more than 400 ACOs serving 8 million of Medicare’s 57 million enrollees.   Because of financial penalties for not saving money and because of the cost of setting up and administering ACOs,  many of the participating  hospitals and doctors are taking a financial bath.

Dartmouth Takes a Bath

Robert A. Green, executive VP of the Dartmouth Hitchcock system, explained why Darmouth as dropping out, “ We were cutting costs and saving money and paying a penalty on top of that.  We would have loved to stay in the federal program, but it was just not sustainable. “  Dartmouth has to lay off 400 employees and cut its financial losses,  which amounted to $100 million for the program and $12 million for the health system.

Unsustainable

“Not sustainable” has become the mantra for a lot  of CMMI demonstration projects, which do not work out as planned in the real world.  Health insurers, for example,  have  ceased operations of the health exchange market in multiple states,  claiming they can no longer sustain billions of dollars of losses.   CMMI is now experimenting  of testing new ways to pay for prescription drugs  reduce use of medical devices,  and hip and knee replacements.    CMMI asserts it will save $34 million over the next decade,  assuming ObamaCare lasts that long.   But Republicans are not going along  and are preposing to cut $7 million out of the CMMI budget.

Government Not Good at Innovation

The sad truth may be that government has never been very good at innovation.  Historically, the reasons for failure of “government” are clear.   Government cannot managed failure; seldom abandons a project;  is not gambling with its own money; measures its success with good intentions, not results; succrrrd by growing too big to fail and too influential to stop; and cannot go out of business, can print money to keep on going, and is propped up by taxpayer money.

Hold onto Your Wallet

When government proposes to “save money” through innovation,  hold onto your wallet.  In the hands of government, a penny or a billion)saved is not a penny  or billion saved.

In the words of Dr. Elliot Fisher of the Dartmouth Institute of Health Policy, the lead author of the 2006 Health Affairs article  proposing ACOs, “ The model has yet to achieve the benefits may advocates hoped for.”  Maybe the model of independent fee-for-service isn’t all that inefficient after all.