New payment model proposed for ACOs

The current payment plans for accountable care organizations (ACO) do not work and should be replaced with a global payment model adjusted for risk, two healthcare experts say in a Health Affairs blog post.

The Centers for Medicare & Medicaid Services (CMS), which manages the ACO program, has been reluctant "to pay providers a competitive amount based on the entirety of care delivered rather than the history of payments," write David Krueger, executive director and medical director of Bellin-Thedacare Healthcare Partners in Northeast Wisconsin, and John Toussaint, CEO of the ThedaCare Center for Healthcare Value. "CMS payments in all of the ACO models remains tied to historical fee-for-service payments rather than the value of care delivered."

Should the agency continue on this path, Krueger and Toussaint warn that "failure to acknowledge historical improvements and the true cost of delivery will eventually drive the best performers out of the market altogether."

Medicare ACOs saved about $411 million last year, according to CMS data, but few actually earned any bonuses for such savings, raising questions as to how long providers are willing to participate without stronger financial incentives to do so. There was also significant grumbling about bonuses being canceled out due to poorer than expected scores on quality, which some in the provider community have said are unfair.

Instead, the authors write,"if an ACO can perform a knee replacement and produce a good outcome, it should be paid a risk- and region-adjusted amount for the outcome delivered. Once risk and region are adjusted, the payment should be nearly the same across the country. Under this model, healthcare systems would simply compete on providing the best outcomes at the greatest efficiency."

There has been a push for payment reform for ACOs, including the use of bundled payments, from sources such as the Center for American Progress.

However, a new payment system for ACOs won't work unless there are several other components in place, according to Krueger and Toussaint, including CMS insuring and reinsuring losses for catastrophic events, reference pricing and a payment mechanism to cover the costs of high-risk patients.

To learn more:
- read the Health Affairs blog post