Following the Money

Brian Klepper

Posted 12/06/12 on Medscape Connect’s Care & Cost Blog

On The Health Care Blog, veteran analyst Vince Kuraitis reviews a report from the consulting firm Oliver Wyman (OW), arguing that the trend toward reconfiguring health systems to deliver more accountable care is more widespread than any of us suspect.

“The healthcare world has only gotten serious about accountable care organizations in the past two years, but it is already clear that they are well positioned to provide a serious competitive threat to traditional fee-for-service medicine. In “The ACO Surprise,” our analysis finds that 25 to 31 million Americans already receive their care through ACOs-and roughly 45 percent of the population live in regions served by at least one ACO.”

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Medicare Providers Don’t Want Less Revenue

Roger Collier

Posted 2/9/12 on Health Care Reform Update

The Congressional Budget Office’s January issue brief on the failure of almost all of more than thirty Medicare demonstration projects to cut costs generated considerable discussion. Judging from the reactions of some health care policymakers, the CBO’s findings came as a surprise.

They shouldn’t have.

Aside from the fact that the results of virtually all of the demonstrations had previously been published, the failure to reduce Medicare spending is exactly what should have been expected.

Let’s take a look at the three payment models used by CMS for the demonstrations:

  1. Regular Medicare reimbursement plus a guaranteed no-risk fee or bonus for participating
  2. Regular Medicare reimbursement plus a fee or bonus dependent on performance
  3. Bundled payment for demonstration services

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A Thousand Dollars Says Dr. Ezekiel Emanuel Is Wrong About ACO’s Long Term Prospects

Jaan Sidorov

Posted 2/1/12 on the Disease Management Care Blog

Approximately 15 years ago, the Disease Management Care Blog was a speaker at a conference with an audience mostly made up of managed care leaders. It boldly argued the nation’s disease management vendors were going to help put the nation’s health insurers out of business by simultaneously assuming risk and lowering costs.

Hows that for chutzpah. The DMCB was never invited back, but not because it isn’t an outstanding conference speaker who deserves fat fees.

It was because it was utterly wrong.

And so is this online commentary on accountable care organizations (ACOs) courtesy of the The New York Times. In it, Dr. Ezekiel Emanuel boldly predicts that by 2020, ACOs will drive health insurance companies out of business. They’ll do that by assuming full risk, dropping patient barriers to care, coordinating services, fostering communication, promoting health, banning fee-for-service, increasing efficiency, relying on evidence-based care, being locally responsive and competing against other ACOs on cost and quality

Dr Emanuel is being astonishingly overconfident for four reasons.

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Accountable Care Organization Regulations – The ACO is a Camel, Not a Unicorn

David Harlow

Posted 10/31/11 on HealthBlawg

232323232-fp53393-nu=3238-235-766-232923585737;ot1lsiThe final Accountable Care Organization regulations are out, the initial flurry of commentary is out (including my own ACO webinar with simultaneous  #ACOchat tweetchat –available for download/replay soon; slides here now: “ACOs, Bundled Payments and the Future of Health Care“), and we can now all catch our collective breath and contemplate the draft vs. final ACO regulation comparisons, the meaning of this new, final set of regulations, guidances and statements from CMS, FTC, DOJ, OIG, and IRS on ACOs and Medicare Shared Savings Programs, and all of the attendant antitrust, antikickback, Stark, and other fraud and abuse matters, and of course tax issues.

So, now that these final regulations are out, and the mythical characteristics of the ACO will soon be dispelled (see under: unicorn), I propose a new animal kingdom metaphor for discussion of Accountable Care Organizations:

The Camel’s Nose is in the Tent.

The definition of a camel, as those of you who tuned into my ACO webinar already know, is a horse designed by a committee.  And, given the nature of the legislative and rulemaking processes, that’s exactly what we have before us – a camel.

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ACOs: The Good and the Bad

To muted applause and some sighs of relief from providers, HHS released the final ACO regulations last week. 

The final version superseded the much-criticized draft regs published several weeks earlier. This previous draft was widely regarded as imposing overwhelmingly complex rules for the chance of sharing in any gains. As one commentator noted: “The promise of integrated, coordinated and cost-effective care provided by hospital-physician networks had run into the reality of having to invest millions dollars with a questionable ROI, a complex maze of up and downside risk calculations, reams of burdensome quality measures and overlawyered antitrust regulations.

So the final less-unwieldy rules have been relatively well-received. On the other hand, fundamental questions about the viability and impact of ACOs remain:

  1. Will the potential “bonuses” justify the financial investments? Major hospital systems (likely to be the primary ACO sponsors) seem to be willing to play so long as the regulations are not too onerous. And as with other HHS initiatives, those willing to participate are likely to be those who are most confident that they can readily cut costs and gain the savings bonuses. On the other hand, ACOs that aren’t able to do a much better job of coordinating care will be unable to recoup their investments.
  2. Will there be losers? Physicians and hospitals who don’t participate in ACOs may find HHS squeezing rates to be in line with costs of competing ACOs. And even in successful ACOs, hospital staff and individual physicians may be in danger of losing their jobs as the ACOs try to reduce variable costs in order to achieve the “bonus-eligible” level.
  3. Why are hospitals so interested in ACOs? It’s a great opportunity to tie physicians more tightly, thereby guaranteeing referrals and admissions and strengthening the hospitals’ rate negotiating positions.  At the same time, the hospital risk is small; the ACO component is expected to be tiny relative to the size of the Medicare program, and with beneficiary assignment made prospective in the final rules, the costs and risks for participating providers are even less.
  4. Will ACOs really enhance cost-effectiveness? In some cases the answer will be yes, with the ACOs achieving the objectives of their government designers. In other cases, however, the pros of better integrated care will be more than outweighed by the cons of quasi-monopolistic hospital systems able to dictate their terms to insurers and other payers.

There is one more fundamental problem with the present ACO design: by randomly assigning Medicare beneficiaries to ACOs, much of the opportunity to impact the highest cost cases may be lost. A more targeted approach might begin to show the savings that the Medicare program desperately needs. On the other hand, HHS’ track record of success with its chronic care demonstrations gives little confidence that the government could indeed achieve these potential savings.

The bottom line seems to be: ACOs will generally demonstrate the virtues of integrated care (something that was known already), while in too many cases encouraging monopolistic hospital systems to become even more entrenched.

Roger Collier used to be CEO of a large health care consulting practice. Now he writes at Health Care Reform Update.

CMS Wants Docs To Ante Up To CMS Poker Game

Michael Millenson

Posted 10/20/11 on Forbes

In a high-stakes political, clinical and economic poker game that goes by the name of Accountable Care Organizations (ACOs), the Centers for

Medicare & Medicaid Services (CMS) has just issued a call for doctors and hospitals to grab some chips and ante up.

The set-up goes like this: one of the biggest potential changes in how health care is actually delivered contained in the Accountable Care Act was ACOs.

They’re voluntary, but they allow doctor- or hospital-led organizations that take responsibility for coordinating the care of at least 5,000 Medicare beneficiaries to get reimbursed at a higher rate for providing better-quality, lower-cost care. It’s supposed to be a win-win-win for providers, patients and taxpayers and part of a more general move towards “value-based purchasing.”

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Employers Perceive that Health Plans Add Value to ACOs

Vince Kuraitis

First posted 9/29/11 on e-CareManagement Blog

A just released study from Aon Hewitt and Polakoff Boland — 2011 Employer Driven Accountable Care Organizations Survey Report— examines employer attitudes toward ACOs.  The report provides useful insights into an area that hasn’t yet received much attention.

A couple tables in particular caught my attention.

(click on the graphic to view a larger version)

Key findings in this table include:

  • Hospitals come out lowest (employers are only 30% very/somewhat confident in hospital driven ACOs)
  • Large medical groups come out slightly higher (31% very/somewhat confident)
  • Involving a health plan significantly increases employer confidence for both hospitals and large physician group ACOs:
    • Confidence in a hospital/health plan ACO increases to 48% very/somewhat confident (up from 30% with hospital alone)
    • Confidence in a medical group/health plan ACO increases to 53% very/somewhat confident (up from 31% with medical group alone)
  • A large percentage (25–26% answered Do Not Know) to all options

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