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Insurers, health-care providers at odds on rules for 'accountable care organizations'

By Jordan Rau
Kaiser Health News
Sunday, January 9, 2011; 5:50 PM

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. 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 how will bonuses be 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, a deputy administrator at CMS.

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, along with bonus rules that would 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 who go outside an ACO for care. And the groups are resisting efforts to penalize them if they miss savings targets, according to letters they've sent to CMS.

Insurers, meanwhile, are pushing CMS to put 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.

Some people who came up with the ACO concept are also worried that CMS might 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."

The Congressional Budget Office estimates that by 2019, ACOs will save Medicare $1.2 billion a year. That's a sliver of Medicare's budget, but advocates hope the savings will grow over time. (Another provision of the law, an independent board that can compel broad reductions in Medicare, has greater potential for big short-term savings.)

Success may depend on CMS's rules. If the rules give providers too much flexibility, savings could vanish - or ACOs could even end up becoming a fiscal burden. If the rules are too strict, provider groups warn that few doctors and hospitals may join the experiment.

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 that health-maintenance organizations sometimes encounter. But if patients can go elsewhere for care, should an ACO be held responsible for them?

"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 American Medical Association wrote to CMS.

The Federation of American Hospitals, representing for-profit facilities, goes further, urging that ACOs be allowed to choose their patients. "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.

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 that 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 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 your discharge instructions? Did you understand what the doctor said when you left the office?' "

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.

Rau is a senior correspondent with Kaiser Health News. KHN, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health-care-policy organization that is not affiliated with Kaiser Permanente.

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