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ACOs under fire from all sides

June 6, 2011

A federal experiment of accountable care organizations produced lackluster results, adding to withering criticism of federal rules proposed for ACOs. But local hospital systems aren't backing away from the idea.

Last week, the Washington Post reported results from a five-year Medicare experiment with accountable care organizations. The experiment offered financial bonuses to 10 leading health care organizations that demonstrated high-quality care to seniors covered by Medicare that also lowered overall costs.

All 10 of the groups met the experiments’ quality requirements. But in the final year of the program, only four of the 10 groups slowed costs enough to qualify for a bonus. Only two organizations received a bonus all five years. And three groups received no bonus.

“It looks like ACOs may not be the magic bullet that the Obama administration had hoped,” wrote David Dranove, a professor of health industry management at Northwestern University’s Kellogg Graduate School of Management, in a blog post.

Dranove also noted that the steps that actually proved to be money-savers in the experiment—like creating a 24-hour telephone line on which patients could receive advice from nurses—do not depend, as ACOs do, on close integration of hospitals and doctors.

The accountable care experiment will be expanded nationally, as prescribed by the Patient Protection and Affordable Care Act (a.k.a. health care reform). But such an expansion depends on health systems' actually participating.

The American Hospital Association and the American Medical Association (made up of physicians) have blasted Medicare’s proposed rule, which was released March 31.

Perhaps even more serious, some of the health systems that provided the basis for the ACO experiment—such as Minnesota-based Mayo Clinic and Pennsylvania-based Geisinger Health System—have been cool to Medicare’s proposed rules for taking it national.

And in a May 26 letter to the Medicare program, the CEO of the Cleveland Clinic said the rule creates costly burdens on hospital systems in exchange for uncertain success on getting any bonus.

“Rather than providing a broad framework that focuses on results as the key criteria of success, the Proposed Rule is replete with (1) prescriptive requirements that have little to do with outcomes, and (2) many detailed governance and reporting requirements that create significant administrative burdens,” Dr. Delos Cosgrove wrote in his letter. He added, “The combination of these factors creates significant barriers to potential applicants and, in our opinion, will discourage their engagement with this innovative concept.”

Major hospital systems in Indianapolis have been gung-ho about the ACO concept, buying up physician practices and signing others to agreements that demand coordination of care and a focus on quality.

Franciscan St. Francis Health remains gung-ho. "We still fully intend to go forward with our formation of an ACO because we believe it's the right and proper thing to do," said spokesman Joe Stuteville.

IU Health is also still on the ACO path. But the turmoil with the Medicare rules have it taking a wait-and-see approach on doing an ACO contract with Medicare. Hospitals all have the option to continue being paid by Medicare based on each service performed in their facilities; however, the rates Medicare is paying have been stagnant and are set to fall in coming years.

“We are definitely moving toward a new delivery model based on accountable care. However, our decision to participate in the CMS program will not be determined until we've had the opportunity to review the final rules when they are issued,” wrote IU Health spokeswoman Margie Smith-Simmons.

And Community Health Network is just hoping the rules, which are written by the Centers for Medicare and Medicaid Services, or CMS, get more favorable.

"In our review of the CMS regulations for the Medicare Shared Savings Plan (MSSP), we were concerned, like many others, about the overly broad and prescriptive requirements," said Community CEO Bryan Mills in a statement. "We are hopeful that CMS will use the comment period as a time to make changes to the MSSP, and we look forward to reviewing the final rules when they are released."

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