Accountable care organizations enter into the spotlight as part of health care reform

Orthopedist calls the concept ‘frightening’ and warns that the model could impact physician profits.

The government is exploring the accountable care organization model as a potential option for overhauling the federally run health care delivery system.

While proponents of the model say that accountable care organizations (ACOs) could stem the growth of health care costs while improving the quality of patient care, others argue that the division of funds under the model could negatively impact physicians’ profits.

Government interest

Under the ACO model, a set of primary care physicians, specialists and, in some cases, hospitals accept joint responsibility for health care costs and the quality of care for their patients. The model seeks to base payment on value, instead of volume, and requires providers to report on quality measures.

In its June report to Congress, the Medicare Payment Advisory Commission (MedPAC) cited ACOs as a possible method to bring about Medicare delivery system reform. MedPAC examined two variations of the ACO model; a mandatory model, in which the providers receive a shared bonus payment for meeting both cost and quality targets and receive a lower Medicare reimbursement if they fail to reach either target, and a voluntary, bonus-only model in which providers would receive an incentive payment for meeting both targets and would not be penalized for missing targets.

Need for incentives

Among their conclusions, MedPAC noted that ACOs would require a minimum of 5,000 beneficiaries, formal organization and spending targets set prior to implementation.

“The ACO’s role is to create a set of incentives strong enough to overcome the incentives in the fee-for-service system (FFS) to drive up volume without improving quality,” MedPAC wrote in its report. “The degree to which ACOs will succeed in counterbalancing the current incentive for volume growth is uncertain. However, there is no uncertainty in the need to create a new set of incentives. The current unrestrained FFS payment system has created a rate of volume growth that is unsustainable.”

House interest

In addition to MedPAC’s interest in the model, a version of America’s Affordable Health Choices Act of 2009 (H.R. 3200) includes a provision to implement an ACO pilot program to be conducted by the Secretary of Health and Human Services. If the bill is passed, the program will begin no later than January 1, 2012 and would run between 3 and 5 years.

A separate House bill introduced by Representative Peter Welch (D-VT) also calls for the establishment of an ACO pilot program as an amendment to the Social Security Act.

Obstacles

Jack M. Bert

Orthopedics Today Business of Orthopedics Section Editor, Jack M. Bert, MD, called the concept of ACOs “frightening.”

“The main premise for this system is that the policy makers feel that they must create a system ‘strong enough to overcome the incentives in the FFS system to drive up volume without improving quality,’” Bert told Orthopedics Today. “I do not know of a single physician that wants to increase his Medicare population, nor do I know of a single physician that attempts to increase hospital stays for medical conditions or surgical procedures.”

He also challenged arguments that the rate of unsustainable volume growth is due to an unrestrained FFS payment system and noted that advanced technology has contributed to higher quality care.

Trickle-down approach

Bert expressed frustration that the model takes a trickle-down approach to the distribution of payments.

“It is illogical to me to have the facility receive the payment and then determine what they will pay the surgeon performing the procedure,” he said.

In addition, he cited agreement on governance and profitability for the physician as stumbling blocks of this model.

“This concept is akin to the failed capitated plans of the past which did not result in reduced costs as higher quality care was linked to an improvement in technology,” Bert said. “Unfortunately, efficiency gains are best left in the hands of physicians who control their own ancillary services and are thus responsible for the cost and quality of the care that they deliver.”

However, he said that ACOs that lack hospital partners may help avoid reimbursement issues.

“Since it is the physician’s ultimate responsibility to afford the highest quality care for the patient, the majority of the bonus payment should go to the physician after overhead is determined,” Bert said. “The hospital is simply the ‘office’ that the surgeon and the primary provider work in and should be reimbursed as such.”

Pilot project

The director of health policy at the Dartmouth Institute for Health Policy and Clinical Practice, Julie L. Lewis, said that the ACO model is designed to create minor reductions in spending growth which can have enormous effects.

“The shared savings component allows providers to decouple revenue and profit from volume and intensity,” Lewis told Orthopedics Today. “Providers begin to be rewarded for caring for a well-defined patient population as effectively and efficiently as possible.”

The Dartmouth Institute, in collaboration with the Engelberg Center for Health Care Reform at the Brookings Institution, will conduct a pilot project to test and refine the ACO model. The project currently includes three pilot sites with more than 1,000 total providers. Each site includes at least one hospital, Lewis said.

The first sites are expected to launch next January, and the pilot will run at least 5 years in the private market with the hopes of Medicare involvement in 2012.

“The ACO model is not the ‘golden ticket’ of healthcare reform,” Lewis said. “But, it is designed to be a pathway toward a sustainable delivery system.”

Editor’s note: For the latest developments on health care reform legislation, please visit the ORTHOSuperSite Twitter page.

For more information:

• Jack M. Bert, MD, can be reached at 17 W. Exchange St., 307 Gallery Medical Building, St. Paul, MN 55102; 651-223-9204; e-mail: bertx001@tc.umn.edu.
• Julie L Lewis, can be reached at 35 Centerra Parkway, Lebanon, NH 03766; 603.653.0849; e-mail: Julie.L.Lewis@Dartmouth.edu.

Reference:

• Report to the Congress: Improving Incentives in the Medicare Program. Medicare Payment Advisory Commission. June 2009. Available at: www.medpac.gov.