Are ACOs a Bet on the Wrong Horse?

ACOs May Improve Care Without Saving Money


This week’s Accountable Care Organization (ACO) shindig has prompted some criticisms of the ACO model as a vehicle for significantly addressing America’s problem of runaway healthcare spending. I’ve made similar observations in my book on Obamacare, so I can’t say I’m surprised that the evidence of cost savings with ACOs is slim to none.

One such critic is Jeff Goldsmith, PhD, a professor of public health sciences at the University of Virginia. He’s quoted in a story in yesterday’s MedPage Today as saying:

“I don’t believe shared savings (via ACOs) will be a viable total replacement for Medicare fee-for-service (payments). I don’t think that it is going to be a broadly adoptable model that will enable Medicare to shift (financial) risk onto the provider community.”

The report goes on to qualify that Dr. Goldsmith isn’t critical of ACOs as a delivery model as much as a financing model that will save money in the delivery of healthcare. It also quotes him as suggesting ACOs may not have been an appropriate substitute for a single payer or public option under Obamacare. mostly because he doesn’t believe they can be rolled out nationally as a dominant delivery model.

Yet the growth in ACOs continues apace, with over 30 million Americans estimated to be served by ACOs as of late 2012.

Here’s how David Pittman describes the ACO model at MedPage Today:

“ACOs are a fairly recent payment and delivery model in which a group of providers work in collaboration to deliver high quality, low-cost care to a defined group of patients. In the increasingly popular shared-savings model offered by CMS, ACOs have split up to half of the savings they generated the prior year. It’s a dollar amount that’s dependent on hitting quality measures.”

Can Docs Make Them Work?

Another expert at this week’s ACO meeting was Dr. Paul Ginsburg, PhD, President of the Center for Studying Health System Change. His report focused on the greater potential for physician-led ACOs to save money compared to hospital led-ACOs that suffer financially when they reduce hospitalizations and use of ancillary services. Quoting Dr. Ginsburg from the MedPage Today report…

“‘I think physician-led ACOs inherently make markets more competitive because they have an opportunity to shift patients toward higher-value hospitals,’ Ginsburg said. ‘It means that a hospital market that might not have large competition going, all of a sudden, if there’s a physician-led ACO, those hospitals have to compete on price for the allegiance of those physician-led ACOs.’…

“Unlike in hospital-led ACOs, doctor-led ACOs aren’t compromised financially by reducing hospital admissions and emergency department visits, he pointed out.”

Of the approximately 400 ACOs nationally, slightly over half are physician-led rather than hospital-led.

Fragmenting the ACO Market

This report also quotes Charlie Baker, former Health and Human Services Secretary in Massachusetts and also former head of Harvard Pilgrim Health Care, the nation’s top-ranked health insurer, as expressing support for physician-led ACOs and concerns that the federal Medicare rules favor hospital-led ACOs.

He’s quoted as stating “The CMS rules are making it exceedingly difficult for an independent physician group to form an ACO.” He also notes that every ACO that private Medicare Advantage insurers have contracted with are phsyician-led and not hospital-led HMOs.

This seems to show a rather sharp divide between the view of Medicare bureaucrats who favor hospital-led ACOs and the private insurers that contract with Medicare and favor physician-led ACOs.

This fragmentation of ACOs into vastly divergent models of who controls patient flow is likely to further stymie any real progress in containing costs using this delivery model.

Can Either Approach Really Work?

My own experience as an ACO patient suggests that physician-led ACOs may not have the secret code for containing costs either. I belong to one of the oldest ACOs in America, completely physician-controlled and with strong IT integration of electronic medical records, patient portals and the like. I have to schlep great distances for basic procedures like CT scans, presumably to save money compared to using hospital-based services.

Yet all this inconvenience and integration doesn’t seem to save a nickel. This physician provider group – while a leader in quality of care – is the most expensive physician network in the state and probably in America (since I’m in Massachusetts, always a front-runner for the most expensive healthcare in the country and the world).

And while I’m very happy with them and recommend them to others -and dutifully travel hither and yon for my medical needs –  I don’t see them as leaders in cost-savings. Nor do the studies done on ACOs, many of them physician-led.

So what’s all this mean?

I think this is an example of what happens when our politics dictate our solutions. Most everyone in healthcare knows, in their heart of hearts, that a single-payer (Medicare-For-All) payment system would cut through all the blather and cause the kind of fundamental changes in healthcare delivery that would actually change the trajectory of our healthcare spending – and very likely improve our quality and coordination of care in the process.

Doctors and hospitals would likely make less money under such an arrangement, but they’d also slash their overhead for all the duplicative and arcane billing that now takes up so much of their time and energy. The net of it all, at least for docs, would be a far simpler practice of medicine with less red tape and frustration and more satisfaction from their practice of medicine.

Of course, it would also put many insurers out of business, which is why it won’t happen. So we’re stuck instead with these half-measures that are little more than lipstick on a pig.

If we had a single-payer health system, there’d still be a need to change how healthcare is delivered to be more coordinated and less wasteful (because it wouldn’t actually be “socialized medicine” in which doctors are government employees). But at least the financing side of it would be simplified and the focus could be more narrowly on care delivery and coordination.

Since that’s not about to happen, look forward to many years of jostling and jousting between insurers, doctors and hospitals. But don’t expect anything significant by way of cost savings.

And even as winners and losers emerge, don’t assume you can sit back and expect your doctors to seamlessly coordinate all your healthcare needs. My own care in my highly sophisticated ACO is coordinated mostly to the extent that I do the coordinating.

It’s a role more of us will have to take on no matter how the ACO battles play out. Get used to it – and get good at it. Because no one has more at stake in it than you.

John Lynch: John Lynch was founder and CEO of Medical Diagnostics, Inc. - twice named to Business Week's "Best Small Companies" in America. He's since founded MedSmart Members to publish consumer health education publications.
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