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MEDPAC Probes Effectiveness of Accountable Care Organizations

By Jane Norman, CQ HealthBeat Associate Editor

April 13, 2009 -- Washington just can't get enough of accountable care organizations (ACOs). Members of Congress are talking about them as a way to save money and increase quality in the U.S. health care system, and the Medicare Payment Advisory Commission (MedPAC) again probed the concept as it relates to Medicare at its April 9 meeting.

The discussion of ACOs was so absorbing and provoked so many questions that the commission had to cut back on the length of two later presentations from MedPAC staff members. While there were no votes or decisions, MedPAC Chairman Glenn M. Hackbarth urged commissioners to "strive for concreteness" in their deliberations because of the interest in Congress in ACOs. He said there is a "growing belief that more organization in the delivery of care is an important step."

The commission is a closely watched independent agency that advises Congress on highly complex and technical issues surrounding the Medicare program, with 17 members each appointed to three-year terms.

An ACO would be a group of providers held responsible for the quality and cost of health care for a population of Medicare beneficiaries, according to MedPAC staff members who prepared a presentation on the concept that followed up on another at the March 12 meeting. An ACO would be a combination of one or more hospitals, primary care physicians and possibly specialists, and would be accountable for total Medicare spending and quality of care for the Medicare patients served. Bonuses and penalties could be tied to overall Medicare spending and quality measures.

ACOs could be useful for Medicare because the 44-year-old program needs mechanisms for controlling cost growth and improving quality, with current spending growth unsustainable, said MedPAC staff members who detailed two models to be debated. One was an ACO made up of volunteering providers and the second was a voluntary ACO paired up with a Medigap SELECT supplemental plan that would be bought by beneficiaries. In the second model, beneficiaries would save money by using providers who are in the ACO.

Commissioners questioned how ACOs would work in rural areas, how those who don't often use their Medicare benefits would be signed up, whether specialists must be involved because of their costly services, if an "opt-out" option could be devised, how the incentives would work effectively—and how or why providers could be enticed into the ACO.

Commissioner Ronald D. Castellanos, a Florida urologist, said anxious providers recognize a need to change Medicare fee-for-service incentives and some inquiries into ACOs have been made in his area. "But then the doctors in my community look at me and say, 'Why do you want to do this? Why do you want to move away from what we call a very robust, perhaps overly funded in some respects, less-risk program to go into something like this?' They say what's the incentive that I have just to improve quality and resource use?

"I kind of tell them maybe it's going to be done to us unless we are part of the solution."

Replied Hackbarth: "I think that you gave them the right answer because it's going to happen to you regardless. You can either organize and try and deal with the problems, or you can get squeezed another way, in an unorganized system."

Hackbarth at the conclusion of the meeting outlined what he called "ACO design principles," the first of which was that such organizations can't be the only solution to Medicare's many problems. "I just don't think we are confident in this particular basket that we want to put all of our eggs in it. There is just too much uncertainty about how it will develop. That's my view," said Hackbarth.

Participation in such organizations must be voluntary for providers, he said. "We're talking about forging new relationships among actors, relationships that have evolved this way over decades," he said. "To say that everybody is going to do a certain thing quickly is unrealistic in that context." Definitions or forms of ACOs should be flexible, and no individual physician should be required to participate, he said. "I think you want people in who want to participate in this task," and groups eventually could even involve private insurers, Hackbarth said.

Beneficiaries should not be locked in to ACOs, he said, since if they want that kind of a closed system they can choose Medicare Advantage, the managed care component of Medicare. ACOs also could be used to address equity issues, including inequities for providers who are seeking more efficiency yet are penalized for those efforts, said Hackbarth. Another issue that might be addressed within the structure of an ACO is regional inequity in payments, another hot button within Medicare.

The discussion of ACOs has been going on for some time but stepped up following a January analysis by Dartmouth College researcher Elliott S. Fisher. His co-author included Mark McClellan, former administrator of the Centers for Medicare and Medicaid Services who's now director of the Engleberg Center for Health Care Reform at the Brookings Institution, and John M. Bertko, a former executive with insurer Humana, Inc.

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