Reform Update: ACO efforts to constrain spending face hurdle—patients

Hospitals and doctors aspiring to increase their margins by controlling health spending are finding their patients' indifference to those efforts a significant obstacle. To grasp how significant, look no further than 300 accountable care organizations under contract with Medicare to manage seniors' medical expenses.

Control of health spending depends on how often patients receive medical care and the cost of that care. Medicare ACOs attempt to reduce unnecessary care by steering patients to low-cost treatment options, such as home healthcare, instead of a trip to the hospital.

Steering patients, however, is problematic when patients can visit any hospital or doctor, including those outside the accountable care network, and patients have little incentive to consider the cost of care. That is the case for patients in Medicare's ACOs, which number about 330 with more to be named in January. While Medicare managed-care plans limit patients' choice of providers, Medicare fee-for-service does not. Accountable care organizations exclusively treat fee-for-service patients.

Early results suggest a large number of patients do roam frequently, ACO leaders have said. Albuquerque-based Presbyterian Healthcare Services—one of Medicare's first ACOs—exited the program after the first year in part because of the system's inability to limit patients' choice of providers. New research this week hints at the scope of the challenge. Harvard University researchers analyzed Medicare bills for patients they estimated to be included in 145 ACOs during the two years before the program launched. Those patients sought 67% of visits to specialists outside the ACOs, and 33% of the beneficiaries were not included in the same ACO both years.

The findings “confirm the seriousness of failing to link Medicare beneficiaries with ACOs,” economist Paul Ginsburg, a health policy and management professor at the University of Southern California, wrote in the journal JAMA Internal Medicine, where the research appeared. “Beneficiaries have no incentive to stay within the ACO, and the study illustrates how little ACOS can do to guide beneficiaries to physicians or hospitals within the ACO.”

Policymakers and hospitals are calling for new incentives for patients to stick with accountable care providers, but the incentives raise thorny issues about the potential for abuse.

One proposal would allow Medicare seniors to volunteer, or enroll, in accountable care organizations. In a letter last week to Dr. Patrick Conway, acting director of the Medicare Innovation Center, the American Hospital Association endorsed such a move. “Patients will better understand that their care will be coordinated among a group of hospitals, physicians, nurses and other providers that will work together to provide high-quality care.”

However that could spark a race among ACOS to recruit the healthiest seniors with the least need for costly medical services that drive spending, said Dr. Kavita Patel, managing director for clinical transformation and delivery with the Brookings Institution's Engelberg Center for Health Care Reform. Voluntary enrollment should be offset with patients who are randomly assigned to ACOs to ensure access for the most vulnerable, she said.

A bipartisan group of lawmakers in the Senate and House, meanwhile, has proposed creating an alternative to the ACO program that would give the sickest Medicare patients an incentive to choose networks of providers to coordinate their medical care. The bill, the Better Care, Lower Cost Act of 2014 is championed by Sen. Ron Wyden (D-Ore.), who this year assumed leadership of the powerful Senate Finance Committee.

Patel, who as of this year is among the physicians operating under an ACO, said the study published this week highlights a need to more closely integrate specialty care into accountable care models, which emphasize primary care, perhaps through extending savings incentives to specialists.

The AHA also called for changes to health benefits, such as lower copayments or deductibles, to create incentives for patient to remain within the ACO.

Further research will help clarify the need for such changes as more data on the early results of ACOs becomes available, said Dr. J. Michael McWilliams, an associate professor of health policy at Harvard University and co-author of this week's study.

“We don't know how well they can steer or control care under the current constraints of the model,” he said.

Top CMS officials Marilyn Tavenner and Drs. Patrick Conway and Rahul Rajkumar write of the agency's efforts to reform healthcare financing in this week's issue of JAMA. The aim, they wrote, is to “move an increasingly large share of total payments to clinicians and organizations from fee-for-service with no link to quality to models that reward quality and efficiency in care delivery and to continue to learn how best to incentivize better health outcomes and lower costs.”

One of these initiatives has awarded $300 million to states to revamp healthcare payment and delivery. The CMS is hoping for a major payoff. “CMS has set an aspirational goal for Model Testing States in the State Innovation Model initiative to work with both public and private payers to shift 80% of their population into value-based alternative models instead of pure fee-for-service within five years.”

Medicare patients most likely to be readmitted in 2011 were those with congestive heart failure, septicemia and pneumonia, according to a new report from the Agency for Healthcare Research and Quality (PDF). The three most common diagnoses for Medicaid patients who were readmitted were mood disorders, schizophrenia and diabetes. Among the privately insured, the top-ranking diagnoses for readmitted patients included maintenance chemotherapy, mood disorders and surgical complications.

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