Duke Economic Policy Researchers Challenge CMS to Innovate

News Update

Duke Economic Policy Researchers Challenge CMS to Innovate

Date

August 16, 2016

Has the accountable care organization (ACO) experiment been successful? 

Duke University’s Kevin Schulman and Barak Richman answer that question and discuss its implication for the aims of the Affordable Care Act (ACA) in a Viewpoint published Tuesday in the Journal of the American Medical Association.

In this opinion piece, the authors advocate for delivery and payment reform that moves away from hospital-led ACOs and toward innovative models of healthcare delivery, like independent primary care ACOs where physicians have stronger financial incentives to lower costs for hospital-based care, adoption of consumer-centered technologies for diagnosing and monitoring health status, and – when possible – provide more care from non-physician providers or community health workers.  Their challenge to the Centers for Medicare & Medicaid Services (CMS):  build new innovative patient- and service-centered models rather than relying on existing hospital infrastructure in ways that has been moving the healthcare system in the wrong economic direction.

Noting that both the Pioneer ACO initiatives and the ACO program under the Centers for Medicare & Medicaid Innovation (CMMI) have resulted in only minimal savings in the cost of care for CMS, may actually increase overall costs when considering the costs to implement the programs at the participating sites, Schulman and Richman ask:  was the ACO experiment not implemented appropriately, or was the hypothesis behind the ACO experiment incorrect?

In response to the first question, the authors argue that the evidence suggest implementation has been wide enough and has included enough variation in incentive and payment models to demonstrate that ACOs are not doing enough to reduce Medicare costs, given the program’s financial fragility and the demographic wave of the baby boom generation.

They then go on to assess the theory underlying the ACO strategy, noting this policy approach has contributed to a faster pace reorganization that actually enables hospital-led delivery systems to exert greater pricing power over private health plans. Evidence suggests that by incentivizing growth through acquisition of physician practices, by dominating local markets, and through consolidation of hospitals, ACO’s have contributed to sharp price increases for private health plans across healthcare markets within states.

Further, the authors note that when a single provider dominates a given geographic area, private health plans have little power to negotiate on price of clinical services. These costs are then passed along to the consumer in forms such as high-deductible health plans and narrow network plans – effectively undermining the ACA’s goal of expanding insurance policy.