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MedPAC Toys with Asking ACOs to Assume Some Risk

By Kerry Young, CQ HealthBeat Associate Editor

November 7, 2013 -- Medicare may need to ask accountable care organizations (ACOs) to accept some financial risk as part of a larger effort to make health care both more effective and less expensive, members of the Medicare Payment Advisory Commission (MedPAC) recently said.

While not making an official recommendation, many MedPAC members said that they favored increased use of a two-sided approach for accountable care organizations, meaning that they enter arrangements in which they would share in both potentials savings and losses.
The alternative is a one-sided arrangement, with no potential for shared losses for the ACOs.

"Ultimately, these ACOs need to be accountable for delivering on outcomes including cost lower than fee-for-service," which is Medicare's more traditional payment model, said MedPAC member Scott Armstrong of Group Health Cooperative in Seattle.

MedPAC staff asked the commissioners to consider whether they want to give guidance in their next report to Congress and the Centers for Medicare and Medicaid Services about expected changes to be made next year to the shared savings programs. These programs are intended to give doctors, hospitals and other providers of medical care new incentives to shift away from the traditional Medicare fee-for-service model, and seek a more coordinated approach to health care that experts say could result in lower costs and better results.

MedPAC also earlier considered changes to ACOs at an April meeting. MedPAC staff then said that 252 ACOs are working to coordinate care for 4.1 million people on Medicare.

ACOs are expected to take steps that result often in improved care, such as reducing the need for hospital readmissions. The saving-sharing "allows the providers to capture that efficiency on their bottom line in a way that fee-for-service doesn't, and in a world where fee-for-service payments are fundamentally under a lot of pressure," said Michael Chernow of Harvard Medical School, vice chairman of MedPAC.

Slow Transition Suggested

Many MedPAC members stressed the need for a gradual shift toward adding risk-sharing to the savings-sharing, the so called "one-sided" approach. MedPAC Commissioner Craig Sammit of HealthCare Partners in Torrance, Calif., questioned whether to add incentives to the shared-savings-only option to draw more medical practices to ACOs.

He asked whether the one-sided approach needs "to be even more attractive next time to bring another tranche along, or will people just stay in the comfort zone of fee-for-service?"

"We kind of need to make one-sided more attractive to bring more or make fee-for-service less attractive, so that we keep moving forward."
Several MedPAC members said that medical practices and hospitals would need time to adjust to the notion of risk-sharing, and should be allowed some time to operate under agreements that only shared savings to adjust to this new model.

MedPAC members also stressed the need for ACOs to build greater ties with the people whose medical outcomes will determine the success of cost-sharing models.

"How in the world can a group be accountable for care for a population of patients that they don't have a relationship with?" asked MedPAC Commissioner Armstrong.

MedPAC Chairman Glenn M. Hackbarth said that policymakers will need to keep in mind what payment alternatives remain for medical practices and hospitals in designing any changes for ACOs.

The old traditional Medicare fee-for-service model encourages "a volume-focused business," he said.

"For a voluntary ACO, you have got to make the terms really delicious" to compete widely against the model, he said.

But, the success of the ACO program may not rest on how common they become, he said. The ACO programs may be most attractive to physician groups, and less so to hospital groups and larger university health programs, he added.

"If all of the academic medical centers are out, if there are no hospital based ACOs, if they are all sponsored by physician organizations, is that necessarily a bad thing?" Hackbarth said. "I could imagine that, in fact, that may be ultimately the most sustainable model on an ACO, and trying to jimmy the rules so that it attractive to academic medical centers may compromise your design."

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