June 09, 2014

Hey Ho, ACO!

Health care costs in America continue to be outrageously high and rising, although there is some evidence that the rate of rise has been slowing, at least within the Medicare program. The proposed fixes to the problem have either focused on patients (claiming that if only patients had more “skin in the game,” they would stop buying care that costs so much), on government (which in principle could control prices or, in the case of Medicare, limit the procedures and treatments it will pay for), or on physicians (encouraging them to provide “high value care” and to eschew “low value care” through a variety of incentives).

The focus on patients hasn’t worked out too well since decision-making rests largely with doctors and often results in choices deleterious to health when patients do actually choose. Health insurance companies continue to promote this option with “high deductible health plans” and tiered reimbursement (more limited reimbursement for more expensive drugs or higher cost hospitals) and free market economists, along with free market politicians continue to advocate “patient choice” and competition as the answer, despite the limitations of this approach to date. 

The focus on government is a problem, at least at the federal level, since government cannot seem to agree on much of anything and is unlikely to pass legislation that could be construed as rationing. And limiting choice, even when the choices that are eliminated are unambiguously bad choices, is seen as rationing. Even having the government (in the form of Medicare) pay for conversations about whether patients want expensive, minimally effective treatment near the end of life elicits the “death panel” canard.

The remaining option is for doctors to solve the problem. One of the leading strategies for doing this is through managed care, which puts the responsibility for rationalizing care, for avoiding needless duplication of services, and for preventing cost shifting from one part of the health care system to another by putting all the components into one integrated system of care. Now this is in principle possible to do with traditional managed care organizations that really do control outpatient services, hospital services, physician services, and post-acute services for their patients. But managed Medicare (the Medicare Advantage Plans) remain a small part of the Medicare program. To allow patients to continue to avail themselves of fee-for-service Medicare but at the same time assure the cost/quality benefits of managed care, the Affordable Care Act came up with the idea of Accountable Care Organizations (ACO). In this arrangement, patients do not actually join an integrated system. They simply see whatever primary care and specialty physicians they wish and go to whatever hospitals they want, but Medicare assigns them to a particular ACO. The ACO is then expected to lower its rate of spending while providing a high level of care. The ACO is rewarded if it succeeds and penalized if it fails. How can this possibly work, if the ACO cannot exercise control over the services “its” patients receive?

A new article in JAMA Internal Medicine suggests that it can’t.
The authors looked at the behavior of over half a million Medicare beneficiaries in 2010-2011 (before the ACO system was put into effect) and found that one-third of them would have been assigned to a different ACO in 2011 from the one they would have been assigned to in 2010. This means that the incentive for an ACO to invest in chronic disease management programs, care coordination, and patient education would be small as they cannot expect to reap the benefits of their investment until much later—by which point the patients might no longer be part of their ACO. They also found that while patients tended to see a primary care physician within the ACO—only 8.7% of primary care visits were to doctors outside the ACO—they saw specialists outside the ACO two-thirds of the time.  If ACO’s can exercise only limited control over the utilization of resources by their patients, how can they possibly control costs?

They can’t. Managed care “lite” is an oxymoron. Either the care is managed or it isn’t. ACOs represent a valiant attempt to preserve patient choice in all things medical but at the same time to accrue the benefits of integrated, coordinated, managed care. The two aims are contradictory. Time to rethink the ACO.

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