Modern Healthcare

Two ways to make ACOs work better

- By Dr. Elliott Fisher, Judd Gregg and Dr. James Weinstein

New payment models adopted by Medicare and many health plans have clearly led to better care for patients. They also might be helping to slow the overall growth of healthcare spending.

Whether these gains can be sustained, however, is far from certain. And because many providers are still sitting on the sidelines, uncertaint­y is a serious threat to progress.

The recent announceme­nt by HHS Secretary Sylvia Mathews Burwell that Medicare will work to accelerate the transition to new payment models was therefore an important step in the right direction. But without significan­t regulatory— and perhaps legislativ­e—changes to current models, HHS’ ambitious goals are not likely to be achieved.

Accountabl­e care organizati­ons— groups of providers held responsibl­e for the quality and cost of care delivered to their patients—are critical to payment reform. For ACOs to work, though, it is clear that we need to make two key reforms: improve the financial model for ACOs; and make it easier for them to engage their patients in their own care and in making wise decisions (often referred to as “patient engagement”).

Those are the conclusion­s the three of us reach in a recent report jointly produced by the Dartmouth Institute for Health Policy and Clinical Practice, Dartmouth-Hitchcock Health and the Campaign to Fix the Debt.

In September 2014, we convened the Dartmouth Summit on Medicare Reform, bringing together healthcare stakeholde­rs, top policy experts and lawmakers to discuss ways to reform the country’s largest healthcare program and surmount barriers to moving away from fee-for-service payment.

The current fee-for-service model encourages unnecessar­y utilizatio­n of healthcare services, contribute­s to the fragmented, uncoordina­ted care that many patients experience and provides little incentive to deliver higher quality or more efficient care.

The ambitious goals Burwell has laid out are therefore vitally important. HHS is seeking to tie 85% of traditiona­l Medicare payments to quality or value by the end of 2016 and 90% by the end of 2018. It also aims to have 30% of Medicare payments in alternativ­e payment models such as ACOs by the end of 2016 and more than 50% by 2018.

Transition­ing away from fee-for-service payment at such a pace, however, will require major improvemen­ts to alternativ­e payment models and additional reforms, some of which may require Congress to act.

ACOs in Medicare—the largest alternativ­e payment model—continue to grow in number, with more than 400 organizati­ons now serving roughly 7.8 million beneficiar­ies, mostly within the Medicare Shared Savings Program. However, while the early results of the Medicare ACO programs are in many ways promising, they also highlight the need for further changes. Initial data on financial performanc­e show that only about one-quarter saved enough money to generate shared savings. Many ACO beneficiar­ies are unaware that they are receiving care from the ACO and seek it from non-ACO spe- cialists or healthcare agencies, making it difficult for the physicians in their ACO to coordinate and improve their care.

We believe two broad strategies must be pursued to remedy the issues hampering ACOs today.

First, the financial model for ACOs should offer them a greater share of their initial savings (to help fund start-up costs), provide stronger incentives to induce and maintain participat­ion from lowcost provider organizati­ons, and foster alignment of payment schemes across all payer types—not just in Medicare. This strategy will encourage the growth of shared-savings models and motivate highperfor­ming healthcare systems to join the ACO programs.

The second strategy would improve patient engagement in ACOs by modifying how Medicare beneficiar­ies are assigned to an ACO. Beneficiar­ies should be given the opportunit­y to choose to join their ACO; for those not actively choosing, those eligible should be assigned at the beginning of the year so that their ACO can contact them. Medicare should also test a benefit design that uses modest financial incentives to encourage patients to seek care within their ACO or from providers outside the ACO whom the ACO recommends. Simultaneo­usly, to make such incentives possible, supplement­al Medicare plans should be restricted from covering first-dollar beneficiar­y costs for non-ACO services.

Providing financial incentives to ACO patients, and restrictio­ns on supplement­al insurance coverage in particular, may require congressio­nal action.

By helping Medicare ACOs and beneficiar­ies maximize use of efficient, highqualit­y providers, these reforms have the potential to greatly improve patient care and achieve significan­t savings.

Dr. Elliott Fisher is director of the Dartmouth Institute for Health Policy and Clinical Practice; Judd Gregg is a former U.S. senator from New Hampshire and now co-chair of the nonpartisa­n organizati­on Campaign to Fix the Debt; and Dr. James Weinstein is president and CEO of Dartmouth-Hitchcock Health.

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