The Affordable Care Act promised to cut Medicare’s costs by encouraging doctors to coordinate care — and thus eliminate waste and duplication. So far, it’s backfiring.
The White House claimed that its first efforts to get doctors to coordinate care — the Shared Savings Program and Pioneer Accountable Care Organizations — saved Medicare $411 million in 2014. The administration ignored that it spent more than that on bonuses for the providers who participated. All told, the program actually recorded a net loss of $2.6 million.
Yet the administration is still pushing this scheme. The Centers for Medicare and Medicaid Services just announced the participants of a “new and improved” version — so-called Next Generation ACOs. But ACOs are an expensive failure, and it’s naive to expect that result to change.
Accountable Care Organizations are coordinated networks of hospitals, doctors and other health care providers that agree to take a fixed amount of money per patient they treat, rather than billing Medicare for each procedure they perform.
They’re responsible for making sure that those funds go far enough to meet their patients’ needs. ACOs receive bonuses if they stay under budget — and pay penalties if they go over.
Obama hoped this framework for Medicare would reduce costs and improve care. But ACOs failed immediately.
The Pioneer Program was supposed to include some of America’s best health systems, like the Mayo Clinic, the Cleveland Clinic and the Geisinger Health System. But these networks took one look at the program’s nearly 700 pages of regulation and declined.
The White House cajoled 32 other provider organizations into signing up. The administration carefully screened them, deeming them the most likely to make the accountable-care model work.
Four years later, about half have dropped out of the program. Among them was New Hampshire’s Dartmouth-Hitchcock Medical Center, a nationally ranked hospital, which lost $3.7 million over two years trying to make the ACO model work.
The problem is not that Dartmouth-Hitchcock, or the other ACO dropouts, were providing poor care. In fact, Dartmouth-Hitchcock scored highly on the Pioneer Program’s quality measures.
Under the ACO model, providing high quality care isn’t what counts. What matters most is cutting costs.
So Dartmouth-Hitchcock can score above-average on patient care, but still have to pay government fines in the millions for exceeding its per-patient funding.
Another former Pioneer ACO, Franciscan Alliance in Indiana, scored above average in patient health and still got fined $2.5 million.
By contrast, other ACOs scored lower on patient care, but still won bonuses for meeting the program’s financial benchmarks. Michigan Pioneer, for example, received a lower quality score than Dartmouth-Hitchcock in 2014 but still received $10 million from the government. That’s the opposite of what it should be.
Worse, Dartmouth-Hitchcock provided excellent care while saving money — the supposed goals of the ACO pilot. Its chief health management officer estimated that the hospital saved almost 4 percent from the previous year. But that wasn’t enough to meet the government’s ever-ratcheting demands for cost cutting.
Next Generation ACOs are the government’s response to the impossible situation it has foisted upon many of its pioneers.
Under the new program, financial targets will eventually transition away from being based on a health system’s historic expenditures. In addition, ACOs will not be expected to cut costs as drastically year after year. The government will also take a hospital’s efficiency relative to its patient population into account.
These tweaks are just that — tweaks. They fail to address the fundamental problem with the ACO model — that it puts cost-cutting above patient care.
Indeed, Dartmouth-Hitchcock just declined to participate in the Next Generation program. As the health network’s executive vice president explained, Dartmouth-Hitchcock could suffer “a multi-million dollar loss next year” under the new model.
Given the many failures of the ACO model over the past four years, the administration would be foolish to rerun this experiment. Unfortunately for patients, that’s just what it’s doing.
Health laws’ cost-cutting and patient care priorities
Sally C. Pipes
The Affordable Care Act promised to cut Medicare’s costs by encouraging doctors to coordinate care — and thus eliminate waste and duplication. So far, it’s backfiring.
The White House claimed that its first efforts to get doctors to coordinate care — the Shared Savings Program and Pioneer Accountable Care Organizations — saved Medicare $411 million in 2014. The administration ignored that it spent more than that on bonuses for the providers who participated. All told, the program actually recorded a net loss of $2.6 million.
Yet the administration is still pushing this scheme. The Centers for Medicare and Medicaid Services just announced the participants of a “new and improved” version — so-called Next Generation ACOs. But ACOs are an expensive failure, and it’s naive to expect that result to change.
Accountable Care Organizations are coordinated networks of hospitals, doctors and other health care providers that agree to take a fixed amount of money per patient they treat, rather than billing Medicare for each procedure they perform.
They’re responsible for making sure that those funds go far enough to meet their patients’ needs. ACOs receive bonuses if they stay under budget — and pay penalties if they go over.
Obama hoped this framework for Medicare would reduce costs and improve care. But ACOs failed immediately.
The Pioneer Program was supposed to include some of America’s best health systems, like the Mayo Clinic, the Cleveland Clinic and the Geisinger Health System. But these networks took one look at the program’s nearly 700 pages of regulation and declined.
The White House cajoled 32 other provider organizations into signing up. The administration carefully screened them, deeming them the most likely to make the accountable-care model work.
Four years later, about half have dropped out of the program. Among them was New Hampshire’s Dartmouth-Hitchcock Medical Center, a nationally ranked hospital, which lost $3.7 million over two years trying to make the ACO model work.
The problem is not that Dartmouth-Hitchcock, or the other ACO dropouts, were providing poor care. In fact, Dartmouth-Hitchcock scored highly on the Pioneer Program’s quality measures.
Under the ACO model, providing high quality care isn’t what counts. What matters most is cutting costs.
So Dartmouth-Hitchcock can score above-average on patient care, but still have to pay government fines in the millions for exceeding its per-patient funding.
Another former Pioneer ACO, Franciscan Alliance in Indiana, scored above average in patient health and still got fined $2.5 million.
By contrast, other ACOs scored lower on patient care, but still won bonuses for meeting the program’s financial benchmarks. Michigan Pioneer, for example, received a lower quality score than Dartmouth-Hitchcock in 2014 but still received $10 million from the government. That’s the opposite of what it should be.
Worse, Dartmouth-Hitchcock provided excellent care while saving money — the supposed goals of the ACO pilot. Its chief health management officer estimated that the hospital saved almost 4 percent from the previous year. But that wasn’t enough to meet the government’s ever-ratcheting demands for cost cutting.
Next Generation ACOs are the government’s response to the impossible situation it has foisted upon many of its pioneers.
Under the new program, financial targets will eventually transition away from being based on a health system’s historic expenditures. In addition, ACOs will not be expected to cut costs as drastically year after year. The government will also take a hospital’s efficiency relative to its patient population into account.
These tweaks are just that — tweaks. They fail to address the fundamental problem with the ACO model — that it puts cost-cutting above patient care.
Indeed, Dartmouth-Hitchcock just declined to participate in the Next Generation program. As the health network’s executive vice president explained, Dartmouth-Hitchcock could suffer “a multi-million dollar loss next year” under the new model.
Given the many failures of the ACO model over the past four years, the administration would be foolish to rerun this experiment. Unfortunately for patients, that’s just what it’s doing.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.