A Defense of the Current Accountable Care Organization (ACO) Proposed Rule Takes Things From Bad to Worse

The future of standard FFS Medicare?

From time to time, well-meaning attempts to help just make things worse.  One telling example is when Republican Governors, Congressmen and Senators extol the virtues of marital fidelity.  Another is when the Disease Management Care Blog tells the spouse that mini-gargoyle statues could enhance the living room decor. 

And in the same vein,  Paul Ginsburg, writing in the latest New England Journal, ineptly praises the first rendition of the controversial CMS Accountable Care Organization (ACO) regulations.  Despite some political signals that CMS will show some flexibility and change the proposed rule, he hopes they stick to their guns in four key areas. That's because he believes that, when it comes to health care reform, this time the Feds really really mean it.  He thinks that's a good thing. Yet, while extolling the proposed rule, he is simultaneously alerting the DMCB and its readers to some troubling aspects about ACOs and Medicare's payment reforms.

1. Retrospective attribution?  Cost savings will be calculated by looking back at the Medicare claims for the population at the end of the contract instead of the beginning.  This has the advantage of ensuring that all beneficiaries are treated equally.  Dr. Ginsburg says its not a problem because CMS will "provide extensive data on beneficiaries on the beneficiaries who could have been attributed to an ACO."

In other words, the success of the retrospective approach will strongly depend on CMS' ability to provide timely data to the participating ACOs.  Anyone paying attention, especially regular DMCB readers, knows that CMS' track record of data support has been decidedly spotty (here and here).  This is an ACO vulnerability that is bigger than was appreciated by the DMCB.

2. Shared savings?  Benchmarks will be locally based, meaning that historically inefficient organizations will have an easier baseline to beat, giving them an out-of-the-gate advantage in their pursuit of shared savings.  Dr. Ginsburg says that's good, because those inefficient organizations need to change and should be recruited as ACOs anyway. 

What alarms the DMCB, however, is Dr. Ginsberg's carrying this logic forward to what could turn out to be an ultimate zero-sum game.  He notes that if ACOs succeed, "evolution toward national or regional benchmarks is inevitable, and already efficient ACO providers will then get larger rewards."  The DMCB believes it's far more likely that a fiscally strapped Washington DC will ratchet down the national or regional benchmarks, ultimately assuring that all ACO providers get smaller rewards.  In other words, ACOs give the Feds one more tool to squeeze the docs.

3. Quality of care?  Dr. Ginsburg notes that CMS's quality measures will evolve over time.  He correctly notes that ACOs would benefit from some stability in the quality measures. 

The DMCB didn't realize that organizations that commit to ACOs may be forced to shift measurement gears during the life of the contracts.  Egads.

4. Mission over margin or... no margin?  Yes, the up-front investments and the high bar on gainsharing make it possible that the return on investment for participating organizations will be too small to make it worthwhile.  Too bad, says Dr. Ginsburg, because the ACOs are in the vanguard of a transition to value-driven payment and that it is inevitable that fee-for-service payments will go away.

So, in other words, some ACOs will succeed and others may go belly up but all the other providers will watch their Medicare incomes vanish as the Feds innovate their way to value-based purchasing.  This is not changing Medicare as we know it?