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Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities

It’s time to call it — the Medicare Shared Savings (SS) ACO is dead-in-the-water.

Ironically — at the same time — commercial payers are awakening to ACO opportunities.

Please read further.

1) As Currently Configured, the Medicare Shared Savings (SS) ACO is Dead-in-the-Water

The pushback from care providers has been loud and consistent. In the past two weeks the voices have reached a crescendo.

On May 6, the Washington Health Policy Week in Review reported that major delivery systems were highly skeptical:

The nation’s highest-profile health care centers—think of the Cleveland Clinic, the Mayo Clinic, Intermountain Healthcare or the Geisinger Health System—are the models for the Obama administration’s accountable care organization (ACO) proposal. But officials at those tightly organized institutions have so many concerns with the proposed rule to create ACOs that they doubt that they will participate.

On Wednesday May 11, the AMGA (American Medical Group Association) issued a press release summarizing a survey of its membership:

93 percent of respondents stated that they would not participate in the ACO program unless the requirements in the final rule reflect major modifications to the proposals.

On Thursday May 12, a collection of 10 physician groups sent a letter to CMS. These groups were all participants in the Physician Group Practice demo — the predecessor to the Medicare SS ACO:

…as presently proposed, we ALL have serious reservations about the economics and the complexity of the Medicare Shared Savings Program/ACO NPRM. … if left unaddressed, we will be unable to participate.

Today — May 13 —  the American Hospital Association issued a press release summarizing a study estimating ACO startup costs.

The study found that the costs of the necessary elements to successfully manage the care of a defined population is considerably higher – $11.6 to $26.1 million – than the $1.8 million estimated by the Centers for Medicare & Medicaid Services (CMS) in its proposed rule for start-up and one year of ongoing operations.

Care providers voice consistent concerns about the Medicare SS ACO— the bar is set too high:

  • Requiring down-side risk makes participation unattractive, particularly for care providers just starting down the path.
  • Too much risk, not enough reward.
  • Retrospective assignment of patients to an ACO won’t work — there’s no ability proactively to manage patient care.
  • CMS oversight and micromanagement is burdensome and unnecessary.  See items #1 and #6 in a previous blog post for a list of some of the most irksome requirements.

Does dead-in-the-water mean the same as “sunk”?

No. The final rule could look significantly different. The comment period for the draft Medicare SS ACO rule ends June 6 and the final rule should be out August-September.

CMS officials have been inviting comments and have expressed willingness to modify the final rule. CMS officials would be wise to begin signaling significant changes ASAP before providers lose interest.

Also remember that the Medicare SS ACO is only the first ACO opportunity from CMS — there will be many more variations under the Center for Medicare and Medicaid Innovation.

Nonetheless, it’s been a bad two weeks for CMS.

2) Payers Awaken to ACO Opportunities

Ironically, at the same time that providers are becoming disheartened, payers are awakening to ACO and ACO-like opportunities.

I’ve seen a significant shift in payer attitudes about ACOs over the past 18 months:

  • Initial skepticism: “Couldn’t these ACOs cut us out of the loop and contract directly with employers? ANTITRUST! ANTITRUST!”
  • Befuddlement: “How do you spell ACO again?”
  • Newly discovered opportunism: “If ACOs are successful in providing accountable care, costs go down and we would be the primary economic beneficiaries? That’s good for us!”

I’ll be the first to admit that my characterization of changes in payers mindsets is subjective and broad sweeping, so I’m interested whether you agree or disagree.

We’ve seen a dribbling of payer-involved ACO experiments emerge over the past year or so. The sentinel event occurred earlier this week when the Wall Street Journal reported on the plans of Aetna, Cigna, and Wellpoint:

Diversification plans, touted in meetings with investors this year, include stepped up acquisitions and partnerships that will allow the companies to employ doctors directly, deliver health-information technologies, and participate in new hospital-doctor groups known as accountable-care organizations.

I’ll be writing a lot more about this trend in coming months, but its clearly worth putting on your watch list.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 Unported License. Feel free to republish this post with attribution.

13 Comments

  1. AxSys Health on May 13, 2011 at 6:58 pm

    RT @VinceKuraitis: Trend Spotting: 1) Medicare #ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities http://bit.ly/kAywRm #hcr



  2. Netspective Health on May 13, 2011 at 8:20 pm

    Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO… http://goo.gl/fb/xZFy9 #HIT #HealthIT



  3. Aparna M K on May 13, 2011 at 8:22 pm

    Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities | e-CareManagement Blog http://dlvr.it/Rf7kX



  4. Deborah Leyva on May 15, 2011 at 11:41 am

    When I first read the ACO reports, the issue of “sharing” reimbursements among ACO members was a tough nut to crack. It’s easier to see why payers would be interested. Very interesting analysis, Vince. Thanks for sharing.



  5. Vince Kuraitis on May 16, 2011 at 8:42 am

    Trend Spotting: 1) Medicare #ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities http://bit.ly/kAywRm #hcr



  6. Mark Browne on May 16, 2011 at 8:51 am

    RT @healthblawg @VinceKuraitis: 1) Medicare #ACO Dead-in-the-Water, 2) Payers Awaken to ACO Opportunities http://bit.ly/kAywRm #hcr



  7. John Moore on May 17, 2011 at 1:26 pm

    Good post Vince and really appreciate the collection of the various comments from organizations that are coming out and telling CMS to seriously rethink the SS ACO model they propose.

    But I think a broader issue is at play here that you begin to touch upon towards the end when you mention payers and that is simply payment reform. Regardless of what we end up with re: CMS ACO, one thing is for sure, we, as a nation are moving towards new bundled payment models and away from fee for service. This is one thing that all can bet on occurring, heck, risk sharing contracts are already being signed between payers and providers. This is what everyone needs to think about and what their response will be to these new models of payment.



  8. John Moore on May 18, 2011 at 6:52 am

    CMS ACO Rules DOA? http://bit.ly/kaRURJ



  9. David Nicholson on May 18, 2011 at 8:10 am

    RT @john_chilmark: CMS ACO Rules DOA? http://bit.ly/kaRURJ



  10. Pat Rioux on May 20, 2011 at 12:25 pm

    RT @vincekuraitis Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO Oppor.. http://bit.ly/iZ1psI



  11. Celtic Healthcare on May 20, 2011 at 1:17 pm

    RT @vincekuraitis Trend Spotting: 1) Medicare ACO Dead-in-the-Water, 2) Payers Awaken to ACO Oppor.. http://bit.ly/iZ1psI



  12. Neil Versel on July 12, 2011 at 1:01 pm

    RT @VinceKuraitis: Yes, #Medicare #ACO Dead-in-the-Water http://t.co/dXAtgZ1 But not sunk. Depends on final Medicare SS rule.



  13. Benjamin P. Geisler on July 13, 2011 at 10:57 pm

    RT @VinceKuraitis: Yes, Medicare #ACO Dead-in-the-Water http://t.co/dXAtgZ1 But not sunk. Depends on final Med… http://tinyurl.com/6dobkla