MedPAC Considers Accountable Care Organizations as Possible Path to Health Care Reform

The patient-centered medical home could serve as a linchpin for an emerging health care delivery model known as an accountable care organization, or ACO, according to some members of the Medicare Payment Advisory Commission, or MedPAC, which met here on April 9.

MedPAC analysts define an ACO as an integrated health care delivery system that relies on a network of primary care physicians, one or more hospitals, and subspecialists to provide care to a defined patient population. Under the model, hospital and physician networks would be responsible for the quality of care delivered to patients and would receive bonuses for providing high-quality, low-cost care. It's also possible that penalties would be levied for delivering low-quality, high-cost care.

According to MedPAC Commissioner Bruce Stuart, Ph.D., the ACO model would have trouble operating in the current fee-for-service payment environment, which rewards the provision of more services. However, he said, "I could see how something would come together if you had a combination of a medical home and an ACO. I don't see how a straight ACO without something that keeps people together is going to work."

Stuart also said physicians who already are associated with a medical home would be in a much stronger position to work with hospitals under the ACO model.

Physicians and hospitals operating within an ACO would be responsible for meeting defined quality benchmarks, such as low mortality rates or fewer hospital readmissions. Payments would be tied to care quality and resource use based on a common set of incentives. In this way, ACOs would help improve quality and care coordination, key components of delivery system reform, said David Glass, M.S., principal policy analyst for MedPAC.

"ACOs can supply Congress with additional leverage by tying bonuses and penalties directly to the rate of growth in overall Medicare spending, which is ultimately what we want to control," said Glass.

He reviewed the similarities and differences between voluntary and mandatory ACOs. Under both options, CMS would assign patients to physicians and their affiliated hospitals. The voluntary model, however, would allow hospitals and physicians to volunteer to participate in the ACO. The mandatory model would require physicians and hospitals that accept Medicare patients to participate, said Glass.

Neither model would require patient lock-in, meaning patients would be free to choose their own providers.

Penalties in the voluntary model would have to be less stringent because the model is based on voluntary participation, said Glass. "Mandatory ACOs, on the other hand, could have stronger incentives to control volume," he noted.

A mandatory model would engender more resistance on the part of physicians and hospitals, according to Glass, even though mandatory ACOs would have a larger effect on controlling the volume of services and, thus, overall costs.

According to Glenn Hackbarth, J.D., chair of MedPAC, participation in ACOs must be voluntary. "We are talking about forging new relationships among (providers)," and that cannot be done quickly, he said.

Hackbarth also called for flexibility when defining an ACO, saying, "over time, different varieties of ACOs might develop. Some might be managed by a hospital or a hospital/physician joint venture. Some might even involve a private insurer."

In recent months, Congress has become more interested in ACOs, an acknowledgement on the part of some lawmakers that more organization in the health care delivery system is an important step in health care reform, according to Hackbarth, who said organizing health care is a "path out of the wilderness."