Monday, November 22, 2010

Do Accountable Care Organizations (ACOs) Save Money? Or Better Yet, Will We Ever Know For Sure?

The Disease Management Care Blog doesn't know. And that's just for starters.

Confused? So is the DMCB.

It touched on the topic of cost savings in this prior post when it pointed out that one of three cost scenarios for Accountable Care Organizations (ACOs) was possible: 1) no savings, 2) one time savings and 3) cumulative savings, otherwise known as bending the cost curve. "Paul N" left a reader comment to that ACO posting, asking the DMCB to "please explain."

Well, perceptive reader, the least the flummoxed DMCB can do is visually display the three possible outcomes:

First of all, this display of possible ACO cost outcomes over time assumes that there will a continuing year-over-year increase that will never go to zero. The solid blue toward the left represents the baseline rate of increase. Once the ACO is formed, this baseline trend can 1) continue unabated (the blue dotted line) or 2) slow down (the red dotted line). If the savings are "one time", the rate of cost increases will revert back. It will parallel what would have happened if the ACO hadn't been formed (that's the solid red line). However, if cost inflation continues to stay down, the rate of increase will have a lower slope i.e., the Holy Grail of "curve bending" will have been achieved (that's the green line) when you decide to remeasure at the Follow-Up point in time.

The DMCB thinks it's possible to have a "one time" savings scenario if there are one time improvements: hospital beds are temporarily closed, physician staff is consolidated and surgeries are delayed. The cost curve will swing back up, however, if beds, staff and surgeries expand or if efficiencies allow the system to "do more with less." Given the legendary levels of waste in any health care system (for example, here, here and here), that scenario is quite likely.

However, not only is the DMCB saying it doesn't currently know how this ACO "savings" business will work out, it is also predicting that it won't ever know for sure. That's because ACOs won't be operating in a vacuum: while we're tracking their costs over time, various parts of the Accountable Care Act will be kicking in (including subsidized insurance with exchanges), new "must have" drugs or technologies will continue to come on line or unemployment may drop (yes, it makes a difference). What's more, ACOs may find new business lines or become predatory monopolies and make financial mischief of their own.

All those moving parts will create a lot of background noise, making it difficult - despite any sophisticated statistical modeling - to confidently discern any real ACO "music" through all the static. Overseen by an under-resourced and inflexible CMS and loaded with obscure statistical methodologies, endless caveats and actuarial assumptions, the DMCB is afraid that the future reports on "ACO savings" will be the laced with bias, spin and conflicting endpoints strung out over the course of many years.

The DMCB welcomes comments from readers with better insights into health economics.

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