September 23, 2014 at 5:00 am ET
The rush to create accountable care organizations (ACOs) has been one of the most notable results of the Affordable Care Act. Much of the statute implicitly or explicitly created incentives for provider networks to take on financial risk for the care they deliver and the populations they serve. But the early experiences of those provider networks willing to take the plunge suggest this may be a harder road to navigate than policymakers might have anticipated.
It was never going to be easy to create a sustainable ACO model. Health systems and physicians groups have always had incentives to drive increases in volume in an unfettered fee-for-service environment. And while the ACO model – at least as envisioned by CMS – retains the basic structure of fee-for-service payment, it really does represent a profound shift in the economics of patient care. With an emphasis on reducing volume and measuring a broad swath of quality metrics, the ACO model forces participants to rethink some fundamental assumptions about their business models.
Last week, CMS released a set of summary statistics for each Medicare Shared Savings Program (MSSP) participants that reveals just how hard this model is. A few lessons that can be discerned:
The latter observation is important, and indicative of prudence on behalf of providers, as the entire healthcare ecosystem evolves in the wake of the Affordable Care Act. The ACO model is a hard one in which to succeed, and requires a long-term view and strategy for making the tectonic shifts necessary to prosper in this new world. But it is not the only uncertainty providers confront. Providers have a lot on their radar, and a lot of complexity.
That last bullet is important. Per capita spending is falling, in part, because providers are responsive to the incentives that Medicare and commercial payers have put forth in recent years. That does not, however, explain the entirety of the phenomenon. It is just another element of complexity that steepens the path to sustainable ACO success.
So we should probably not be surprised at the middling results evident in the CMS data release last week. This is a long-term, structural shift providers are undertaking. We can draw encouragement, however, from the fact that so many provider collaboratives are experimenting with this model in the first place.
Erik Johnson is the Senior Vice President of Avalere Health.