Insurers Clash With Hospitals And Doctors Over ACO Rules

The new health law encourages doctors, hospitals and insurers to team up in treating patients, but these groups already are at odds as they urge the government to set rules protecting their financial interests.

At issue are “accountable care organizations,” which the Obama administration hopes will spring up around the country, initially treating Medicare patients but eventually other people as well. Networks of doctors and hospitals would coordinate patient care and earn bonuses if they save Medicare money and meet quality targets. The goal is to impose efficiency on a health system that now fosters disjointed and excessive medical care, driving up costs.

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The health law calls for ACOs to be launched in January 2012, with each capable of treating at least 5,000 Medicare patients. As envisioned, these networks of doctors and hospitals might work for the same organization or separately, sharing information about patients and financial responsibility for their care.

But the ACO concept — like others in the health care law that rejigger the financial relationships among providers and insurers — was written broadly. Lawmakers left it to regulators to figure out how to put the provisions into practice. The Centers for Medicare & Medicaid Services must flesh out many issues: Who can run an ACO? How are Medicare patients placed in ACOs and informed of these new arrangements? How is the caliber of care judged and bonuses awarded? What prevents these networks from becoming so large that they can dictate prices to private insurers?

“There are some tough issues with this regulation,” says Jonathan Blum, CMS’s deputy administrator.

With regulators planning to issue rules for ACOs in the coming weeks, some prominent doctor and hospital groups are pushing for features that some experts say could undermine the overall goal — improving care while containing costs. They’re seeking limits on how the quality of their care will be judged, and bonus rules that will make it easier for them to be paid extra for their work, and to be paid quickly.

Hospital and doctor groups also want to avoid being held financially accountable for patients that go outside the ACO for care. And they’re resisting efforts to penalize them if they miss savings targets, according to letters they’ve sent to CMS.

Insurers are helping to drive the fight over financial incentives as they push CMS to place a tighter rein on ACOs. They are fearful that ACOs will try to make up lost revenue from Medicare by charging privately insured people more or coaxing them to get more treatments. Insurers also worry that ACOs will give doctors and hospitals more power to set health care prices in the private market, and are resisting providers’ requests for the government to loosen anti-trust rules.

Device manufacturers, physicians’ assistants and nurses have all weighed in as well with their priorities, and even within health care sectors such as hospitals there are disagreements about how ACOs should operate.

“Each stakeholder group is trying to define rules that will further their own best interests,” says Dan Mendelson, CEO of Avalere Health, a consulting firm. “It is a win-lose situation in some respects.”

Some architects of the ACO concept are also worried CMS may give providers too much leeway.

“It’s difficult to set up an ACO system where providers are able to simply pick and choose” their patients, says Mark McClellan, a former CMS director under President George W. Bush who heads the Engelberg Center for Health Care Reform at the nonprofit Brookings Institution. “It’s hard to see how that kind of participation would actually work.”

Much is riding on where CMS comes down. The law gives the government broad authority in designing the program. If the rules are too lenient, ACOs may not save Medicare the money the Obama administration is counting on?and could even end up becoming a fiscal burden. If the rules are too strict, provider groups warn that few doctors and hospitals may take the government up on its offer to test out a new way of being paid for care.

“The real risk for CMS is the ACOs are a party they throw that nobody attends,” says Dr. Jack Lewin, CEO at the American College of Cardiology.

The Congressional Budget Office estimates that by 2019, ACOs will save Medicare $1.2 billion a year – a sliver of the $895 billion Medicare anticipates spending in 2019.

Backers of ACOs envision them doing a better job of managing care while still allowing patients freedom to choose doctors and hospitals?thus avoiding the consumer backlash health maintenance organizations sometimes encounter. That freedom worries those that would run ACOs. The American Hospital Association, which represents nonprofit hospitals, and the American Medical Association believe ACOs should not be held responsible for patients who sometimes go elsewhere for care.

“If a Medicare beneficiary is unwilling or unable to participate in efforts to better coordinate and manage their care, then an ACO should not be held accountable for the overall costs of services associated with a beneficiary,” the doctors’ group wrote to CMS.

The Federation of American Hospitals, representing for-profit facilities, goes further, urging that ACOs be allowed to choose which patients they want to include in their ACO. “Providers are better positioned than CMS to determine which of their patients would be appropriate candidates,” the federation wrote.

But health insurers want ACOs to be held accountable for all care provided to their patients, even if the patient goes to an unaffiliated provider. “While it may be challenging for ACOs to effectively influence patient care provided outside the ACO network, doing otherwise would defeat the key goals of ACOs, which are focused on comprehensive, patient-centered care,” the major industry trade group, America’s Health Insurance Plans, wrote

Dr. Kavita Patel, a health policy expert, says CMS is likely to heed many providers’ concerns, especially given some of the problems CMS ran into in the past when it tried to select patients for new payment pilot projects. Some of the projected Medicare savings never materialized, she says.

Hospital and doctor groups are also wary about how the quality of their care will be evaluated when CMS decides whether an ACO deserves a bonus.  Several have asked CMS to limit the quality measures, at least initially, to those Medicare already publishes. These include statistics on death rates and compliance with basic medical protocols, such as giving patients antibiotics within an hour before surgery. The medical association doesn’t want surveys of patient experiences to be used in evaluating ACOs.

ACO advocates, while agreeing CMS needs to be careful in choosing new quality measures, don’t agree with all the providers.  “It’s hard to measure technical quality, but we have very good measures of patient experience,” says Dr. Elliott Fisher, a Dartmouth Medical School professor. “Questions such as, were you able to get after-hours care? When you got home did you understand you discharge instructions? Did you understand what the doctor said when you left the office?”

Harold Miller, who runs an association of regional health care purchasers interested in improving care, says there aren’t good measures of many of the conditions ACOs are most likely to focus on for cost savings, such as chronic obstructive pulmonary disease. “It can double the burden of being an ACO if the quality measures don’t line up where you’re actually trying to save money,” he says.

In the dispute over financial incentives, the American Hospital Association is pushing CMS to let providers collect bonuses early on and in full rather than having some of the bonuses deferred as an added incentive to keep up the good work. On the other side, the Blue Cross and Blue Shield Association, which represents some of the nation’s biggest insurers, wants to toughen payment rules so that ACOs that fall short suffer financial penalties, such as having to pay the unanticipated extra costs of care themselves.

Groups that include Congress’ Medicare Payment Advisory Commission and the nonprofit National Partnership for Women & Families are telling CMS it needs the threat of financial penalties, not just bonuses, to spur ACOs to achieve major savings.  “Bonuses aren’t enough,” says Kirsten Sloan, a vice president at the partnership. “There’s no real incentive in a bonus-only model to reduce costs.”

Blum, the CMS administrator, warns that if ACOs face financial penalties, staying financially viable will be harder as they’ll have to make sure they have enough money to remain solvent. “I do think some of the folks coming to us, urging us to put more two-sided risk, they also need to think about what responsibilities, what obligations, what kinds of necessary steps do organizations need to take on for that risk arrangement,” he says.

jrau@kff.org