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MedPAC Says ACO Savings ‘Incredibly Unsatisfying’

October 24, 2016

A key part of Obamacare is not going so well. But before I continue, I assume that some of my readers won’t know some of the acronyms, so I’ll define them.

An ACO is an Accountable Care Organization, which was created in the PPACA (Obamacare). The spirit of an ACO was that hospitals and doctors would join into single administrative units that would work together to create health system efficiencies. Medicare and the ACO participants would then share in the savings generated.

MedPAC is the Medicare Payment Advisory Commission, which was created by Congress to advise it on what Medicare fees should be. Most of the MedPAC recommendations are accepted by Congress. As a quick aside, there is an AMA committee called the Relative Value Update Committee that makes recommendations to MedPAC. Washington Monthly did a great expose on the corrupt RUC process, which is opaque and dominated by ologists. Almost all of RUC’s recommendations are adopted by MedPAC.

MedPAC shared its own ACO data recently and concluded that it spent $646 million on one ACO approach, which lead to $429 million in savings. Yes, that means that MedPAC lost $216 million in the deal. The MedPAC Commissioner Craig Sammit, MD stated that these kind of results are “incredibly unsatisfying.”

There are very many reasons ACOs were destined to underperform (I won’t say “fail.” A few of them eked out a few dollars of savings.). To list all the reasons would make a blog post unreadable, so I’ll just mention one. Obamacare gave no authority to ACOs to demand that patients make changes in some of their attitudes, beliefs, and actions. Patients are not tied to an ACO, have no financial incentives to change any behaviors, and were guaranteed complete freedom of movement and choice of doctors and hospitals.

This approach is nonsense on its face. If one is trying to change a system, then one does not leave out the largest and most frequent user of that system. But that’s exactly what the politicians making politically-based decisions did, which is why ACOs are ultimately destined to “fail.” (Sorry, couldn’t help myself.)

As MedPAC deliberates its next response to this failed experiment, let’s all hope that it keeps in the forefront its most recent recommendation to Congress that “The commission has long argued that primary care providers are undervalued in Medicare’s fee schedule ….” Seriously respecting and incentivizing medical students to become family physicians is the best next step forward to any meaningful healthcare system reform.

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One Response to MedPAC Says ACO Savings ‘Incredibly Unsatisfying’

  1. RSW on November 2, 2016 at 11:17 am

    As with the misbegotten PCMH, the costs of setting up and maintaining an ACO are ruinously high, far out-weighing any bonuses that may trickle down through countless layers of administrators to the physicians.

    And yet the AAFP continues to push both these scams on their membership. Has there ever been a supposedly scientific organization that is so blind to the evidence (and reality)?

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