It's an intelligence test

Now that more parties have had a chance to digest the draft ACO regulations, a consensus of opinion appears to be forming. Not that wisdom always resides with the crowd, but there appears to be a bit of skepticism as to how this will work and whether this will work at all? John Inglehart, the founding editor of Health Affairs wrote a piece in the NEJM this week. I think the key question he raises near the end of his essay...

Perspective

The ACO Regulations — Some Answers, More Questions

NEJM | April 13, 2011 | Topics: Medicare and Medicaid

John K. Iglehart

http://healthpolicyandreform.nejm.org/?p=14218&query=TOC

The proposed regulations are a work in progress, and they raise almost as many questions as they answer. CMS has requested comments on almost every major provision of the rule and granted interested parties 60 days (until June 6) to respond. Key questions relate to many dimensions of the delivery system, whether the care is provided by medical groups, faculty practice plans, or ACO-aligned physicians practicing in affiliated hospitals.^4,5 For instance, how will CMS calculate savings when the time comes? How will CMS feed timely data to ACOs to track cost and quality trends? How will ACOs be designed to avoid running afoul of the antitrust laws? And how likely is it that very few medical groups will actually apply for ACO status because most are persuaded that the risks outweigh the possible benefits?

I think I know the answer based upon a recent piece in POLITICO...

http://dyn.politico.com/members/forums/thread.cfm?catid=16&subcatid=57&threadid=5385432

NO GO ON ACOs— The Everett Clinic has decided to take a pass on becoming a full-blown ACO after five years in a demo designed to test the delivery system model. The clinic’s CEO, Mark Mantei, said the proposed rule CMS has published is far from perfect and the clinic — which treats 250,000 patients — intends to put all its eggs in the Medicare Advantage basket. Mantei tells POLITICO Everett is moving to sign up all its patients in the managed care program because the proposed ACO regulation doesn’t do enough to reward “high-performing” providers. The POLITICO Pro story http://politico.pro/iJP64K

Let me see... Here is a large practice that has lived the ACO for five years, which has presumably underwritten much of the IT infrastructure. They have elected to not pursue ACO status because the risks outweigh the benefits. Of the pilot project participants, the Everett Clinic received the smallest bonus payments. From David Lips http://www.healthleadersmedia.com/page-4/LED-260798/ACOBound-Consider-the-Financials-First

The Dartmouth-Hitchcock Clinic received the most: $6.69 million. Marshfield Clinic got $5.78 million, and the University of Michigan Faculty Group Practice received $1.24 million. Everett Clinic, a group practice of more than 300 physicians in the state of Washington, received the smallest payment for cost savings: $129,268. (Payments for all five years have yet to be calculated.) Everett Clinic paid more than $1 million in up-front infrastructure costs. The average up-front payment was $489,000 plus $1.26 million in operating costs in the first year. These costs are low estimates considering that the provider systems in the demonstration project had already absorbed other integration costs before the project got under way.

These numbers appear to reflect only the second year of the program and certain players did better as time passed .The Marshfield CLinic got a whopping 16 million dolloars in the final year of the program. However, of the ten demonstration projects, four received no shared savings during the entirety of the project and the Everett Clinic received a tiny sum. Dartmouth, which did so well the second year did increasingly poorly, getting only slightly more than $300K in its last year of participation.  http://www.nejm.org/doi/full/10.1056/NEJMp1013896

The Everett Clinic has decided that despite having already invested a million bucks it is not worth staying in the ACO game. Tell me why any other organization would now elect to take such risks if they are entering into the game without such a head start when one of the early adopter with a huge head start has decided it is not worth competing in this arena? This is an intelligence test.