ACOs Run Amok as CCOs in Oregon

In 2011, the Oregon legislature approved the creation of Medicaid "coordinated care organizations" (CCOs). Once the initiative was granted waiver status by CMS, the "Oregon Health Plan" was launched. It's regulated and funded by the "Oregon Health Authority," which also oversees the health insurance for Oregon's public health employees. When it became clear that contracting for the state's public employee business was tied to the CCO participation, most of the larger health systems in Oregon responded by signing up to be CCOs.

According to Eric Stecker writing in the Feb 13 the New England Journal of Medicine, "there is a distinct possibility it could fail."

Yikes.

The planning for CCOs was ultimately based on the assumption that its capitation-based payment methodology would achieve a 2% reduction in costs versus a 5.4% trend. That assumption, in turn, enabled Washington DC's waiver that included $1.9 billion in funding. Unfortunately, that money was tied to penalties if the savings are not achieved.

CCOs signed up with primary care medical homes, promises of clinical integration and a commitment to greater coordination of care. Yet, when Dr. Stecker reviews the Oregon health care landscape, he sees little proof that medical homes are achieving large savings, that the arms race of local competition has moderated or that the movement of patients across care settings is seamless and efficient. What's more, local health providers within the CCOs are largely autonomous and fee-for-service remains the dominant payment methodology for these health systems' other lucrative payers. The likelihood that they're going to change their culture or their clinical work flows to serve the CCO segment of their business is remote.

Dr. Stecker correctly identifies the unproven assumptions that underlie the belief that physician-hospital organizations can cut out the middleman insurers and manage global risk contracts with the pixie dust of medical homes and care coordination.  While those ingredients are necessary, the Disease Management Care Blog agrees that the likelihood of CCOs ending the year with a 2% reduction in claims expense is a stretch. 

The DMCB will stay tuned.