Washington Health Policy Week in Review

Washington Health Policy Week in Review is a weekly newsletter that offers selected stories from the daily newsletter CQ HealthBeat.

  • October 17, 2011 Issue
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Berwick Not Blue About ACOs Despite Beat Down of Proposed Reg

By John Reichard, CQ HealthBeat Editor

October 11, 2011 --The accountable care organization (ACO) proposal issued earlier this year by Medicare officials was slammed hard from all sides and even labeled "unworkable" by one top hospital industry official.

But that hasn't left Centers for Medicare and Medicaid Administrator Donald M. Berwick feeling downhearted about the potential of ACOs to streamline care. The final version of the regulation begins is now being cleared by the White House Office of Management and Budget.

"I think this is a winning idea, I really do," Berwick said in an exclusive interview with CQ HealthBeat. "I think it's going to work very well."

It's probably only a small exaggeration to call the ACO regulation Berwick's pride and joy. "Of all the regulations that I've been dealing with, that's one I've really been most devoted to and interested in," he said.

ACOs tackle head on what Berwick views as a central problem in traditional Medicare and health care more generally—that no one doctor is paid to communicate with all the other doctors treating a patient to make sure that medications don't clash and cause dangerous interactions, or that tests aren't duplicated. Nor are caregivers paid to work together during the "handoff."

So when a patient leaves the hospital with a complicated set of "discharge" instructions, no one is in charge of making sure the patient takes needed medications and makes follow-up appointments to foster recovery and avoid a costly return visit to the hospital.

"The doctor who's seeing the patient in her office doesn't get paid to make sure that the cardiologist and the pulmonologist know everything that's happening" with the patient, he says. "The payment system is chopped up. So the ACO rule is a clever idea."

Seniors in traditional Medicare are used to having their choice of doctor or hospital—and with ACOs they won't have to give that up.

"Patients still have complete choice, they go anywhere they want, which is very interesting. . . we can still, based on behavior, attribute them to a primary care source by watching their behavior. If they get the plurality of their care from the primary care site, they're attributed to that site. And if that site wants to be an ACO, they can do a deal with Medicare.

Critics who slammed the proposed rule said it reflected an overly bureaucratic approach on the part of Berwick. They said there were too many regulations to assure quality of care. There were also too many costly operational requirements for hospitals to be able to afford to create an ACO, Berwick's response is that bringing coordinated treatment to a fragmented system is "not an easy job.

"I think it's gone well, actually" Berwick says of the rulemaking process. "The staff did a super job in beginning to understand how you set this up.

"There are many variables, like how much shared savings? How do you attribute a patient to an ACO given that they have full choice? How will we watch quality carefully enough to make sure skimping doesn't occur? What about collusion? We're now going to have cooperation between doctors and hospitals and when does that deteriorate into distorting markets? And on and on – there's probably 20 or 30 questions that arise from this rather interesting idea of merging coordination with fee for service care."

The "fun really started in a way" during the comment period. "What happened, which I found fascinating – is everybody had a way to make it better. These are competing interests," he noted. People worried about beneficiary protections wanted a lot of surveillance of ACOs to make sure they didn't short change patients on care to make higher profits. Hospitals trying to make ACOs workable wanted more simplicity. Medicare trust fund defenders wanted more savings for Medicare. And "providers want more money for providers."

"We'll have a final rule that will hopefully reflect the increased knowledge we got during the comment period," Berwick said. "Will it be perfect? Of course not. But I think it's going to be a good rule, and I think we're going to have a lot of people interested and involved" in the ACO program.

Critics also say the administration is struggling to get the final reg out. They say that ACOs are a flawed concept and that if the program is structured to draw wide participation, savings will be few. And if it's structured to produce large savings, few organizations will sign up as ACOs, they predict.

Berwick counters that "this program will be on time, it'll be fine." Medicare officials will be ready "at least" by the start of the year to begin reviewing applications.

"It will generate significant knowledge, and some good savings," he said. "We're going to learn our way into this. So the first joiners, the ones that create ACOs first, are going to over time teach us more and more about this environment of coordinated good care."

Before that, CMS will launch a program of pioneer ACOs. "We're already seeing tremendous interest in the pioneer program beyond anything I would have even imagined."

"I've reviewed the applicants and they have the properties I've wanted – pluralism, different kinds of places, geographic variation, different sizes. We're going to learn a lot from that pioneer effort. I'm hoping that the ones that we don't have room for, that can't be pioneers are going to flip over and be just as interested" in applying for the regular ACO program. Berwick says for legal reasons he can't specify how many pioneer ACOs there will be but adds that "it's a lot."

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