AJMC

Shared Savings Program for Accountable Care Organizations: A Bridge to Nowhere?

Published Online: October 15, 2010
Robert A. Berenson, MD
Accountable care organizations (ACOs) have emerged over the past 2 years as the newest big thing in healthcare. Hospitals, physician organizations, community health centers, and lots of other organizations are holding strategic planning meetings to figure out how to get some of the ACO action that the Patient Protection and Affordable Care Act promises.

The specific provisions of the Affordable Care Act that people are excited about are Sections 3022 and 10307, which delineate a Medicare Shared Savings Program and include the broad requirements for organizations that as ACOs would be eligible for participation under the new payment approach. As a program, rather than a pilot or demonstration, any entity that meets the eligibility criteria gets to participate. And because it is a program, the Centers for Medicare & Medicaid Services (CMS) will issue program regulations rather than a request for proposals, with proposed regulations expected to be issued by year-end.

The impetus for establishment of ACOs, which are charged with holding down spending while meeting quality criteria, comes from the growing pressure of escalating healthcare costs on public and private insurers combined with evidence that at least some of this spending appears to not improve either quality of care or patients’ experience with care. Although experts dispute the exact amount of wasted spending, it is generally thought to be substantial.1-4

Even a small reduction in the excessive spending—more precisely, a small reduction in the rate of increase in healthcare spending—on the order of about 2 percentage points in real, per capita growth per year would essentially forestall the need for possibly more arbitrary approaches to cost containment and the specter of actual rationing of care. Accountable care  organizations are thought by many to hold great promise for cost containment because, unlike the “regulatory” approaches used by many managed care plans, the ACO approach would give responsibility for containing costs to clinicians, who can better target waste and inefficiency if motivated to do so, rather than distant third-party public and private payers.

Further, ACOs offer the promise of decreasing the fragmentation of healthcare delivery by bringing under one virtual roof the various medical specialists and other health professionals and institutions that need to coordinate care for the growing number  of patients with multiple chronic conditions. In one recent accounting, half of Medicare beneficiarieshad 5 or more chronic conditions and were responsible for 76% of Medicare spending in 2006.5 A Medicare patient with 5 or more chronic conditions averages 37 physician visits, sees 14 different physicians, and fills 50 prescriptions a year.6,7 Patients with multiple chronic conditions often receive suboptimal care despite the fact that individual clinicians may be practicing according to their own professional standards.

In theory, the ACO would address the fragmented care that too often results from competent clinicians practicing in silos, producing different diagnoses and treatment plans, prescribing incompatible medications, and delivering redundant, costly care. Although a lot of current activity is focused on the addition of promising chronic care coordination and management programs to current healthcare delivery, the ACO—again, in theory—would take practice redesign to a broader level, producing a different business model for success and an altered culture to achieve that success with active involvement of all clinicians and other professionals across the spectrum of care that patients receive.

In practice, numerous provider organizations appear to be well positioned to meet the expectations one would have for ACOs. These include very successful physician-led, multispecialty group practices, such as Scott and White Healthcare in central Texas and Group Health of Puget Sound in Seattle; physician–hospital organizations such as Advocate Health in Chicago; hospitals with employed medical staff such as Virginia Mason in Seattle and Carilion Health System in Virginia; and independent practice associations (IPAs) and management services organizations such as Monarch Health Care in southern California and Physician Health Partners in Denver. Some already own their own health plans and can participate in Medicare through the Medicare Advantage (MA) program.

A real-world model for developing ACOs is “delegated-capitation,” which is being used by health maintenance organizations (HMOs) in much of California and some other markets where medical groups and IPAs (generally without the organizational  inclusion of hospitals) are functioning and, subsequent to a market shakeout in the 1990s, are now doing pretty well.8 In fact, the ACO idea is not really new; in the 1990s, these organizations were labeled provider-sponsored organizations (PSOs), and there were great hopes for them to enter traditional Medicare. Indeed, the Balanced Budget Act of 1997 established the opportunity for direct contracting between Medicare and PSOs, without having a health plan intermediary.

The fact that only a couple of PSOs have participated in what is now called the MA program should offer caution about the prospects for ACOs.9 It appears that organizations capable of meeting the program criteria for risk-taking under MA rules chose either to obtain insurance licenses themselves to become full-fledged MA plans or to contract with insurance companies to serve Medicare patients. The latter activity has been spurred on in recent years by the substantial extra payments MA plans have received since 2004.10 Indeed, many would-be ACOs, such as Geisinger Health System and Kaiser Permanente, already participate in Medicare with their own MA plans. Given this experience, 2 questions need to be asked. First, why would the opportunity to become an ACO produce a different provider response than PSOs did? Second, which kinds of organizations would choose to participate in Medicare under the Shared Savings Program as ACOs?



PROBLEMS WITH THE SHARED SAVINGS PROGRAM MODEL

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Issue: October 2010
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