ACOs:
CO Issues – But Not
Necessarily Answers
Robert A. Berenson, M.D.
Institute Fellow,
Fellow The Urban Institute
AcademyHealth Panel P4P Version 2.0
28 June 2010
THE URBAN INSTITUTE
Section 1899 of Title XVIII of The
Aff d bl Care
Affordable
C
Act
A t
An ACO is an organization of health care
providers that agrees to be accountable for
the quality, cost and overall care of Medicare
beneficiaries in traditional Medicare who are
assigned to it.
Assigned when the professionals in the ACO
provider the bulk of the primary care services.
Assignment invisible to the beneficiary and no
effect on choice
THE URBAN INSTITUTE
ACO legislative features (cont.)
Organizational forms include:
group practices
networks of p
practices ((i.e., IPA))
partnerships or joint ventures between
hospitals and physicians/professionals
hospitals
p
with employed
p y p
physicians
y
other forms as determined by the
Secretary
THE URBAN INSTITUTE
Requirements
Need a formal legal structure
Need sufficient primary care docs for the
number of assigned beneficiaries – at
least 5000
Agree to participate for at least 3 years
Clinical and administrative system
capabilities
THE URBAN INSTITUTE
Requirements (cont.)
Have defined processes to promote
evidence-based medicine and report the
necessary data to evaluate quality and
cost measures
Demonstrate it meets patientcenteredness requirements
THE URBAN INSTITUTE
Payment Model
In fact
fact, the legislative title is called “Shared
Savings” – based on Physician Group
Practice demo model in Medicare
If meet quality standards, will be eligible to get a
share
h
off savings
i
if per capita
it annuall
expenditures in Parts A and B for their
assigned
i
db
beneficiaries
fi i i are a sufficient
ffi i t
percentage below a target amount, which is
based on 3 year historic costs trended
forward for projected growth in spending.
THE URBAN INSTITUTE
Payment Model (cont.)
Requirement for adjusting benchmarks for
each ACO based on beneficiary
characteristics or other factors as
determined by the Secretary
In this payment approach, there is no
downside risk – no payment penalty if
savings targets are not achieved.
THE URBAN INSTITUTE
A Possible Hooker – Section
10307
An amendment added during the reconciliation
process that altered what was prescriptive
Senate language.
If the Secretary determines appropriate
appropriate, may
also use partial capitation or other payment
approaches
pp
in addition to shared savings
g –
no additional spending
But presumably the other specifications must be
met – so beneficiaries would still be assigned
even with some provider risk-taking.
THE URBAN INSTITUTE
Implementation
The program is supposed to go into effect
by Jan 1, 2012
CMS plans to issue a reg outlining the
rules and requirements this fall
Note that this section of the law sets out
a “program
program,” not a pilot or
demonstration.
THE URBAN INSTITUTE
Is ACO Just a New Term for PSO
(P
(Provider
id Sponsored
S
d Organization)?
O
i ti )?
• In BBA 1997, PSOs were created to
permit Medicare to engage in financial
risk contracting directly with providers
• They built it and no one came – actually
3 in 10 years.
THE URBAN INSTITUTE
What May Be New?
• Greater
G t flexibility
fl ibilit iin organizational
i ti
l models
d l
• New payment models, no longer full capitation – e.g.,
FFS w. shared
h d savings
i
b
based
d on ttotal
t l spending
di and
d
partial capitation
• Improved risk adjustment
• Availability of performance measures
• Prospect of ratcheting down on FFS rates otherwise
provided new incentive to play
• Alt
Alternatives
ti
tto a beneficiary
b
fi i
h
hard
d llock-in.
ki N
No
restrictions at all in the legislated model.
THE URBAN INSTITUTE
How Would an ACO Work for
P
Purchasers
h
and
d Commercial
C
i l Plans?
Pl
?
• Well-founded concern about Medicare
“sanctioned” ACOs developing
p g and
using market power in negotiations to
drive prices higher
• Concern is they
y might
g reduce costs but
not provide the savings to purchasers in
reduced premiums
THE URBAN INSTITUTE
How Does Antitrust Enforcement
Aff t ACO
Affect
ACOs
From Speech of Christine Varney, Assistant
Attorney General,
General Antitrust Division
Division, DOJ
(5/24/10)
“The
The economic integration that justifies
application of the rule of reason to joint
negotiations
g
with p
payers
y
requires
q
the sharing
g
of some form of financial risk… or sufficient
clinical integration to induce the group’s
members
b
tto improve
i
th
the quality
lit and
d
efficiency of the care they provide.”
THE URBAN INSTITUTE
But how do incentives for
improved quality and
efficiency pass back benefits
to consumers when an ACO
has market power in
negotiating
ti ti over prices?
i
?
THE URBAN INSTITUTE
ACO Skeptics Arise
• In many markets, physicians have drawn
away from the hospital and function
increasingly independently on a day-to-day
basis. The relativelyy weak financial incentives
in “flexible payments” may not be able to
bring them together.
• Jeff Goldsmith on Health Affairs blog –
“The p
problem with this movie is that we’ve
actually seen it before and it was a
colossal and expensive failure.”
THE URBAN INSTITUTE