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Contributor: ACOs Are Pro-Consumer, but Must Address Lack of Beneficiary Awareness


Conversations are ongoing between CMS and patient advocates on how accountable care organizations (ACOs) and similar programs can better interface with beneficiaries.

The health policy community has seen a spirited debate ensue over the merits of the Center for Medicare and Medicaid Innovation (CMMI) Direct Contracting program. One important policy question—alluded to by single-payer advocates but not yet addressed in depth—is whether consumers are well served by accountable care and similar programs. In February, CMMI tweaked Direct Contracting, rebranding it as the ACO REACH Model. CMS officials have also opened a dialogue with beneficiary advocates to discuss how its programs interface with consumers. Here I offer a framework for thinking through these issues.

Our analysis should begin by revisiting the origins of the accountable care organization (ACO) model. Researchers at Dartmouth, documenting geographic variations in the intensity of medical care, noted that Medicare beneficiaries in certain locales, including Minnesota, receive high-quality care at much lower costs than in other places, such as South Florida. At that time, the sustainable growth rate (SGR) formula was in effect as an attempt to limit excess volume of care. The original ACO concept would have devolved the SGR’s global budget to the local level, making it easier for physicians to cooperate in rationalizing care and limiting SGR penalties to high-cost regions.

In 2009, Congress began assembling the Medicare reforms that were folded into the Affordable Care Act. At that time, Congress wanted to abolish the SGR, so the ACO moniker was grafted on to a voluntary program resembling Medicare’s earlier Physician Group Practice demonstration.

Are patients better served when they receive care in Minnesota? Certainly, the clinical quality and outcomes are better, cost sharing (or Medigap premiums) is lower, and patients are less likely to receive care that is unnecessary, of equivocal value, or treats “pseudo-disease.” ACOs do indeed reduce spending in high-cost regions, and consistent with realigned financial incentives, they appear to reduce hospitalizations and readmissions, especially with regard to patients with serious chronic illness.

But positive results at the population level don’t guarantee a positive experience for every individual patient. We don’t know to what extent the more intense style of care prevailing in South Florida reflects patient demand for it. Some patients, as regularly recounted in The Washington Post’s Medical Mysteries feature, are not well served by doctors with conservative practice styles. We know that beneficiaries have the option to choose Medicare Advantage (MA) plans, and more are doing so, which implies a degree of self-sorting of beneficiaries who prefer conservative treatment out of the fee-for-service (FFS) program, perhaps resulting in a disproportionate number of beneficiaries who prefer aggressive treatment remaining in FFS.

The good news for the latter group is that even under alternative payment models (APMs), they retain their freedom of choice to see any provider and ability to obtain any care they want. But while ACO- and Direct Contracting–attributed beneficiaries are explicitly notified that they retain freedom of choice, they are not given sufficient information to think about when to exercise that right. Current notifications may also be ineffective in reaching beneficiaries.

These issues are particularly salient with the advent of Direct Contracting, which stands at the shoulder of FFS and managed care. Although Direct Contracting does not limit patients to a provider network or require prior authorization, it introduces new elements: capitation, private equity investment in physician practices, and group practices whose primary experience is in MA plans. The latter entities differ significantly from what earlier ACO iterations envisioned: independent physician practices serving FFS beneficiaries brought together to streamline care. CMMI has not articulated a rationale for bringing these entities, which are available to beneficiaries through MA plans, into FFS as well.

Unlike ACO doctors, these doctors are likely steeped in a managed care practice style that may be manifested in a “soft” version of gatekeeping: fewer referrals to specialists, or to specialists less likely to recommend procedures, and “gagging” any mention of higher-cost treatment options.

Unlike auto enrollments of dually eligible beneficiaries into managed care under the Financial Alignment Initiative, beneficiaries in FFS APMs are not permitted to opt out of a model. Instead, de facto opt-outs are available as pushbacks at the individual encounter level. Beneficiaries may opt out of claims data sharing to dissuade providers from care management activities, they may decline to cooperate with a case manager if the attention is unwelcome, or a patient can reject specialist referrals, seek second opinions, or change primary care providers. But without a full understanding of physicians’ financial incentives, beneficiaries may not consider whether to exercise such choices. Further, beneficiaries could assume, as is true in pure FFS, that providers’ incentives are to do more and push back on recommendations for the wrong reasons.

The current notifications received by beneficiaries are wholly insufficient in that they do not convey to beneficiaries that the usual FFS incentive to provide more care has been reversed. They give a sunny and upbeat portrayal of care coordination, which is unobjectionable, but there needs to be a more balanced tone overall, including disclosure of the physicians’ downside risk. Disclosures of capitated physicians’ financial interests were mandated by many states during the 1990s.

Ideally, CMS should retain a contractor with appropriate expertise to develop new language for notifications and conduct consumer testing of disclosure options, under the guidance of a Technical Expert Panel.

A further concern is the apparent lack of effectiveness of model disclosures in registering with beneficiaries. Last summer, my organization, Dialysis Patient Citizens, asked our members if they recall getting notifications of being in a Medicare “model” or initiative, and their understanding of the notice. An outsized proportion of end-stage renal disease (ESRD) beneficiaries are assigned to APMs: approximately 30% to the ESRD Treatment Choices Model, and approximately 12% to the ESRD Seamless Care Organization program. About 20% of all Medicare beneficiaries are attributed to ACOs. Thus, around 40% of ESRD beneficiaries should have seen some type of notification. However, only 12% of survey respondents recalled receiving one, and fewer still could identify which program they were in.

The penetration of APM notifications to only a third of affected beneficiaries—especially in a subpopulation very likely to have received services from APM participants and thus having more than written notice—is unacceptable. It is especially worrisome in the context of Direct Contracting and the general movement toward 2-sided risk, which raise the stakes considerably.

It’s desirable for CMMI to experiment with different models, especially as the looming insolvency of the Medicare Trust Fund is likely to spur congressional efforts to tighten provider payments. It is a plus for consumers that there are payment models available, such as ACOs, that can reduce costs while retaining freedom of choice, as an alternative to policy options like vouchers that would migrate seniors to pure managed care. But CMS needs to prioritize informing beneficiaries and ensuring that APMs produce a positive patient experience.

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