Letter: ACOs are starting point for healthcare reform

The healthcare landscape continues to change at a blistering pace, forcing reforms in payer-physician reimbursement models. Traditional methods payers used to compensate providers are quickly disappearing. Newer models that focus more on incentivizing quality and efficiency through the formation of accountable care organizations(ACOs) may soon become the norm with the goal of achieving better care for individuals and lower per-capita costs.

The introduction of ACOs was envisioned by many as the great savior for our flailing healthcare system. But a retrospective analysis of today’s operating ACO’s demonstrates they are really LACO’s (Limited Accountability of Care Organizations). 

Primary care physicians sit at the top of the ACO pyramid. They control the largest share of healthcare decisions, but over the entire spectrum of care their influence has only  a limited impact. In reality patients, specialists, hospitals, and other services have no incentive to change behavior. Primary care providers cannot stop them from self-referring themselves to a specialist for relatively minor issues. They cannot directly impact the cost-effectiveness of hospitals and other ancillary services. They are powerless to control the lion’s share of  healthcare expenditures.

The driving force to motivate physicians to participate in an ACO is the portion of savings achieved in delivering higher quality, more cost-effective care. The biggest dilemma is how to define actual savings, because different illnesses have different costs. Physicians have differing patient mixes. Defining targets for spending must be standardized based on specific risk factors that correspond to different levels of acuity in treatment.This is determined from their coding in billing claims. But this does not necessarily solve the problem. In fact, it may reward the wrong physicians.

Next page: "The current model may not reward those providing quality care"

Those providers that can afford to hire coding specialists or purchase sophisticated software can actually be providing less cost-effective care than the majority of providers that rely on remembering a basic subset of ICD [International Classifcation of Diseases] codes. This basic list of codes may still reflect their patients’ healthcare ailments but are less specific and thus have lower risk scores. Lower risk scores are assigned lower annual target expenditures. So the current model may not even reward those providers that are providing cost-effective, quality care.

The concept behind accountable care organizations provides us with a starting point in healthcare reform. We must refine the structure the organizations to one that aligns the goals of all participants, including patients.

Commercial payers are jumping on board by tempting providers who are disillusioned as to the potential rewards for their efforts. Many times the formulas set up to reward them are skewed toward rewarding those organizations that start out as very cost-ineffective. Providers that are more costly at the start have much greater opportunities to grab a share of the savings.

Those providers that are already cost-effective are not rewarded for their initial efforts, but only for what other cost-effective care the commercial payer can squeeze out of them. Providers are somewhat blinded by the temptation of commercial payers hinting at rather large shared-savings payouts.

They forget, however, that in two to three years their overhead will continue to rise, shared savings will hit a point of diminishing returns, and they will find themselves with an outdated, lower fee schedule and higher expenses. There needs to be a blended solution that rewards efficient providers with higher fee schedules and the opportunity for shared savings with improved outcomes and quality.

Next page: Controlling hospital expenditures is key

We must also monitor the activity of ACOs that participate in the Medicare Shared Savings Program (MSSP), because they are granted anti-trust exemption in the commercial market as long as they operate under the same parameters as the MSSP. This exemption could create the potential for ACOs to leverage commercial payers into more lucrative contracts without fear of government ­action.

A much bigger fear is that many of these hospitals are hiring companies to help run their ACO with the goal of starting their own commercial health plan. By controlling the hospital piece they can now demand higher reimbursements from other commercial payers forcing them to raise their premiums and allowing the hospital based health plan an opportunity to shift lives to their plan.

More competition sounds good unless you control the largest part of healthcare expenditures: hospitals. In the end the hospitals reap the financial benefits with a direct cost to consumers.

The point is, the ACO system is not perfect. However it is a starting point. We must align the goals of all participants. We must not allow the MSSPs to be abused. We must better define quality, cost-effective care. We need everyone in healthcare to work together toward common goals with incentives to change behavior, including that of patients. Without such cooperation our healthcare system will crumble.

Robert Resnik, MD, MBA

 Cary, North Carolina