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Hospitals want to delay a key Obamacare program

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Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoons for the latest edition — and read all previous columns here.

In 2011, the Obama administration settled on 32 health care systems, scattered across the country, to lead the Affordable Care Act's most ambitious cost-control effort. These hospitals and doctors would move Medicare away from paying doctors for volume—and toward paying for value.

The group was given a name that has stuck: the pioneers. When I asked the Advisory Board's Chas Roades to describe the group, he called them "The Lewis and Clarks of hospitals."

"They're really exploring new territory," says Roades, who oversees research for the hospital consulting firm.

These Lewis and Clarks have—as many pioneers do, when faced with new territory—hit some choppy water. A year into their endeavor, they are demanding changes and delays to some of the act's programs central tenants.

The Pioneers are the first health systems to test out the Accountable Care Organization model. Under this system, a set of providers bands together and agrees to accept a lump-sum payment for seeing a set number of Medicare patients.

If they can deliver seniors' care at a lower price, while hitting certain quality metrics, the hospitals would share in some of the savings generated. If they went over budget though—or could not make the quality targets—they would be out of luck.

Quality metrics are crucial to the ACO enterprise. They play a huge role in determining whether a health care system nets a bonus, or takes a hit. And, right now, most of the ACO Pioneers disagree with the Obama administration's approach to appraising quality.

"Quality measurement is really hard," Dartmouth's Elliott Fisher says. Fisher recently co-authored a major Institute of Medicine report on the issue, and says there's no industry standard on quality measurement—but always lots of questions.

Should doctors have to aim for perfection, ensuring all patients undergo the recommended set of procedures? Should they have to hit a specific target—or just improve on their historical track record? And whose recommended course of care do hospitals even rely on?

"The tension here is an essential quality measurement conundrum," says Kavita Patel, a fellow at the Brookings Institute who has written extensively on the ACO program. "Where do you set the target? If you set a flat percentage—let's say that 75 percent of seniors should get flu shots—that sounds reasonable. But what if no one is getting above that? Or everybody is?"

Medicare has run into this problem before with its quality-rating program in Medicare Advantage, which assigns somewhere between one and five stars. The plans with more stars get a bonus payment—and likely higher enrollment, as the quality metrics are made available to shopping seniors.

The problem there was, where the benchmarks were set, the Government Accountability Office found that 90 percent of the Medicare Advantage plans qualified for a bonus payment. Avik Roy described it as a "Lake Wobogen" approach to health care, where nearly all the private plans were above average.

When Medicare started with the Accountable Care Organization program, it proposed more than 70 quality metrics that would determine whether hospitals could receive bonus payments. Providers balked, and the list was culled back to 33 metrics.

For the past year, the Pioneer ACOs have received payments just for reporting data on the 33 metrics, which includes data on how many patients receive mammograms or end up back in the hospital 30 days after their discharge. In 2012, no payments were tethered to how good or bad their outcomes were.

That changed in 2013. Now, the health care providers are scheduled to move from pay-for-reporting to pay-for-performance—and are getting nervous about how they will be judged.

"We all feel like we're pioneering an effort to convert our health care system from purely volume-based to a more value-based approach," says Jim Hinton, the CEO of Presbyterian Health Services in New Mexico, one of the Pioneer ACOs. "So like any programs of a new size, there have been some start up and transition issue."

Hinton's hospital joined 18 other Pioneer ACOs in sending a letter to Medicare late last month, asking the agency to rethink the benchmarks it had set for the program. That letter, first reported by Inside Health Policy, argues that the ones in place now either have too little data behind them and don't take into account the baselines from which hospital systems are starting.

The same letter also asked for 2013 to be another where the ACOs would only report data, rather than have financial consequences tethered to their performance.

"That would give us time to collect data and make the measures strong," says Emily Brower, director of Accountable Care Programs at the Boston-based Atrius Health. "We're suggesting they should develop the data base, and use more credible, empirical data to measure us."

The downside to this, of course, is delaying the whole point of the ACO program: Tethering providers' payments to the quality of the health care that they provide.

At the same time, Dartmouth's Fisher does see a rationale for giving the pioneers a bit more time to find their way through the health policy woodwork.

"I have visited lots of them and they are trying really hard," he says. "They have put millions of dollars into this, and may well be able to achieve substantial savings. But if they aren't eligible for savings, because Medicare made a benchmark decision arbitrarily, that's not great for the program."

The Pioneer ACOs have asked for a response from Medicare by April 2, so they can "make informed decisions regarding our ongoing participation."

Even with a one-year delay, the business of setting quality metrics won't get any easier, but it will give Medicare more time to respond to the concerns that these health care systems are raising.

"There are good reasons to be nervous about the flat rates that have been chosen," Fischer says. "We don't actually know, until we collect more data, how hard it will be to meet some of those standards. So I think the argument in the letter is a reasonable way forward."

KLIFF NOTES: Top health policy reads from around the Web. 

Behind a cancer treatment center's rosy survival claims. "A lot of doctors, hospitals and other healthcare providers in the United States decline to treat people who can't pay, or have inadequate insurance, among other reasons. What sets CTCA [Cancer Treatment Centers of America] apart is that rejecting certain patients and, even more, culling some of its patients from its survival data lets the company tout in ads and post on its Web site patient outcomes that look dramatically better than they would if the company treated all comers." Sharon Begley and Robin Respaut in Reuters

Virginia's McDonnell to feds: No Medicaid expansion. "Gov. Robert F. McDonnell sent a letter Tuesday to President Obama’s health secretary to stress that he and the General Assembly have not agreed to expand Medicaid." Laura Vozzella in the Washington Post

The Medicare age cut-off in Rep. Paul Ryan's budget is still up in the air. "The House Budget Committee has not decided if it will change Medicare benefits for people 55 years and older in its fiscal blueprint due out Tuesday, Republican members of the panel said." Elise Viebeck in the Hill.