The ACO Delusion


“We have been sold on the idea that this particular incarnation of the HMO/Managed Care will save the government, save physicians and save patients all at the same time. …….The biggest sin the ACO’s commit is to distract from any real conversation about cost…………  “

The ACO Delusion

Apr 25, 2016


Accountable care organizations (ACO’s) promise to save us.  Dreamed up by Dartmouth’s Eliot Fisher in 2006, and signed into law as a part of the Patient Protection and Affordable Care Act (PPACA) in 2010, we have been sold on the idea that this particular incarnation of the HMO/Managed Care will save the government, save physicians and save patients all at the same time.  I dare say that Brahma, Vishnu and Shiva together would struggle to accomplish those lofty goals.  Regardless of the daunting task in front of them, the brave policy gods who see patients about as often as they see pink unicorns, chose to release the Kraken – I mean the ACO – onto an unsuspecting public based on the assumption that anything was better than letting those big, bad, test ordering, hospital admitting, brand name prescribing  physicians from running amuck.

I realize I am being somewhat harsh towards the creators of the ACO morass.  But, while they all may be well-meaning, hard-working folks that own a Harvard crimson sweater, their intent is to fundamentally change how health care is provided – this mandates a withering evaluation.  As Milton Friedman aptly said, “One of the great mistakes is to judge policies and programs by their intentions rather than their result.”  Thus, with little regard to intent, and with an eye on the end result, I say unequivocally : ACO’s do not work.

I didn’t need big data to come to this conclusion.  It came to me as I reviewed the details of an ACO commercial agreement that offered an extra $4 per patient per month for successful care coordination combined with the delivery of an as yet undefined high value care metric.  The high priests that are only moved by mountains of evidence will look askance at statements like this because anecdotes like this have no real currency. The data, they preach, will cleanse, purify, and speak the truth. Small problem … the early results are in … and shocking no one who actually does care coordination, the results are not good.

Getting results on ACO’s is not easy – ask Kip Sullivan.  Apparently, the smartest guys in the room who came up with ACO’s designed a construct that is so complex, assessing their effectiveness may require building a large hadron collider.   The vehicle set in place by the ACA to provide for ACOs is the Medicare Shared Savings Program (MSSP).  This program allows provider organizations (ACO’s) to share in savings with Medicare if spending is kept below a financial benchmark.  The details of how the financial benchmarks are set up are somewhat opaque, but essentially amount to Medicare using a pre-ACO-contract-initiation period to arrive at a spending average baseline.  Year over year changes in cost per beneficiary are then compared to the national average medicare spending growth.  ACO’s that come in under the national average Medicare spending growth rate get to keep 50% of the savings that accrue to Medicare.  Based on these benchmarks the Center for Medicare and Medicaid Services (CMS) announced last year that in 2014 ACO’s saved $411 million dollars.

There is, however, a significant problem with this approach.  ACO’s are generally regional, and Medicare spending patterns vary widely by zipcode.  It is not the best idea to compare ACO’s in regions with high cost growth to national spending growth patterns.  A much more valid comparison would be to compare ACO costs with non-ACO costs within the same region.  This is exactly what authors of a recent study in the NEJM attempted to do.

The authors looked at the medicare claims and enrollment database to calculate spending per medicare beneficiary by region in ACO patients and non-ACO patients.  They examined ACO’s based on when they began (2012, or 2013), and looked at 2013 spending average data.

The grand total savings per beneficiary in the group of ACO’s that joined in 2012 was $144 (- 1.4%).  ACO’s that joined in 2013 saved $3.  To rub salt in the wounds, there was also no real difference seen in ‘high value’ care provided to patients (hospitalizations, 30 day readmissions).  I hedged on the differences in high value care when I probably shouldn’t have – the ACO folks did get their LDL checked more often – yes, that was a metric of high quality care.  The savings estimated for the 2012 ACO group was $238 million dollars, but unfortunately, there was no net savings because Medicare paid $244 million in bonuses to ACO’s.  The study also gave no dollar value to the cost of setting up the ACO – one assumes someone is paying for that?  The only silver lining I could find in the study was a subset analysis that showed significantly greater savings for independent primary care groups compared to groups integrated with hospitals.

To summarize:

  • ACO’s that joined in 2012 demonstrated savings of $144/beneficiary
  • ACO’s that joined in 2013 saved $3/beneficiary
  • There was no meaningful difference in value delivered to patients within ACOs
  • There were no net savings to Medicare after accounting for bonus payments paid to ACO’s
  • ACO’s that consisted of primary care physicians saved significantly more money than groups integrated with hospitals

This early data should give policy makers pause.  This was not a positive study, and it importantly re-enforces some significant concerns for physicians that are at the tip of the health care delivery spear.  These concerns may be difficult to comprehend to the folks making decisions at one thousand feet… so allow me to take you to ground zero.

Ground Zero: The Story of Mrs. K  

I received a message Saturday morning from my answering service.  Mrs. K wanted to speak to me.  I happen to be Mrs. K’s third cardiologist.  I met her 2 weeks ago.  She had gained 20 pounds over the last 3 months, had a kidney transplant, severe aortic stenosis and had a systolic blood pressure that stubbornly stayed above 200mmHg.  She had shortness of breath just getting out of bed to go to the bathroom, and my fingers sunk in to her legs as if they were a memory foam mattress.  It didn’t take me long to discover why I was her third cardiologist.  She refused to listen to any of my suggestions, and went on to discount the reasonable suggestions of her prior cardiologists. She had a ‘reaction’ to almost every medication I suggested, and she decided on a daily basis if she would take the medicines that were prescribed to her.  It took a combination of cajoling and threatening to finally have her trust me enough to come into the hospital.  It took even more convincing – sometimes on a twice daily basis – in the hospital to get her to take the medications as prescribed.  She improved markedly and was able to be discharged.  Of course, this was just the start of our relationship.  My office reached out almost every day to check her weights, and to re-enforce the need to take her medications.  I called her back on Saturday, and listened, sometimes impatiently, while she relayed to me her feeling of chills that were definitely due to the pills I was administering.  I tried to reassure her and implored her to stay the course.

I guess this is called care coordination.  I just call it taking care of a patient. It is too early to know what will happen to Mrs. K.  A hot dog’s worth of sodium may be enough to have her end up in the hospital again. Beyond the somewhat inconsequential debate about whether or not the patient would be attributed to me in a way that would allow me to share in some cost savings is the larger point that I could care less if Mrs. K was within an ACO or not.  The ACO, in its current incarnation, does nothing to help me take care of Mrs. K.  Those millions of dollars to the ACO’s?  If  your patient belongs to a hospital-run ACO, most of the Medicare cost savings do not end up with the physicians in charge of delivering high value care at a reduced cost.  Let’s take my regional ACO – 30% of savings go to the ACO, 30% to those investing in the ACO (hospitals), and 40% to physicians.  Any wonder that $4 per month is what’s left over after everyone has taken their cut?

I think the biggest sin the ACO’s commit is to distract from any real conversation about cost.  There is plenty of cost savings to be had within the current construct, but we the public (Jim Purcell explores this well in his recent article) don’t want to make hard choices.  We are a wealthy society, and a wealthy society prizes its health.  In India, a rise in the price of onions is cause for rioting.  In the great United States, suggesting mammograms not be covered until age 50 may result in charges of misogyny by liberals, and charges of fascist death panels by Palin republicans.  Even the interventions that wouldn’t cost the public anything sit behind walls guarded by special interests.  Currently, a significant pay differential exists between services provided by hospital-based outpatient departments (HOPD) and freestanding, physician-owned clinics.  This means that the same echocardiogram provided in the same venue by the same people is many times more expensive if a hospital owns the clinic.  This is not a secret.  The Medicare Payment Advisory Commission (MEDPAC) has advised Medicare of this no-sense differential every year since 2012.  Hospitals have resisted attempts to cut this vociferously, and successfully.  But never you mind – just remember – the ACO will save us.

Anish Koka is a cardiologist based in Philadelphia.