Monthly Archives: October 2014

A Poor Prognosis for the ACO Model

The results of the Pioneer ACO program were released by CMS after completing its second year.   This is not a front page news story for good reason.

The Pioneer program attracted 32 of the most confident and motivated medical centers that were willing to take on full downside risk if they failed to spend less than their target amount.  After year one, 9 centers dropped out of the program.  Three more did so this past August.

14 of the remaining 20 centers saved money in year two for an average of 3.11% below the target.  Six of 20 centers overspent their target in year two by an average of 1.97%.  The net result for the group of 20 centers was a 1.59% savings under the goal set for them by CMS.  Again, these are the most highly motivated medical centers trying to reduce costs by going after the “lowest hanging fruit”.

The US spends more than twice as much on per capita healthcare as all other countries in the world.  Every statement about waste within the US healthcare system indicates that 30% of our expenditures are unnecessary.  Therefore, a 1.59% savings by this group of medical centers sends one clear message:  the ACO model is not likely to be the answer for our broken healthcare system.  We can do better than this!

Strategies to Reduce Low-Value Care

In response to article by Carrie H Colla, PhD, N Engl J Med. 2014; 371:1280-1283, October 2, 2014.  “Swimming against the Current – What Might Work to Reduce Low-Value Care?”

Controlling healthcare spending in our broken fee for service model is certainly comparable to swimming upstream.  Fee for service is not the primary force behind that current.  Until recently, patients have not been concerned about costs, and providers as well as third party payers have had incentive for higher spending.  How could we expect anything other than out of control spending?

Dr Colla concludes that the best solution for our broken system lies in educating the patients with tools such as “Choosing Wisely”, and putting providers on the hook with risk sharing models such as accountable care.  In this construct, costs are not open for discussion, and patients are left out of the decision making process.   From the consumer standpoint, ACO is “prix fixe” healthcare.

Alternatively, educating patients and doctors about cost (since neither one knows much about this now), putting the patient on the hook for some of the costs (this is already happening with cost sharing insurance policies such as high deductible and co-insurance), educating patients with “Choosing Wisely”, and rigorously measuring quality, is a more patient-centered strategy.  Consumers will learn to distinguish between providers that guide them toward high value, and away from low value care versus those that do not.  Quality  scores of wasteful providers will tell the story.

Transparency of cost is coming and will be needed to define low vs high value.  An MRI may be a high value for a given condition at $400 but low value at $4000.  An honest assessment of value cannot be made without full disclosure of costs. Let’s start swimming with open eyes.