• Some ACO questions and a gaming hypothesis

    I know I said I wouldn’t be blogging this week. I’m making an exception to ask a few questions about ACOs of this blog’s knowledgeable readers.

    First question: I understand beneficiaries will be assigned to ACOs according to where they typically receive their primary care. Presumably that has been made more precise. Where can I find the details in as simple a form possible? I’m not eager to comb through the Federal Register if I can avoid it.

    Second question: If I understand correctly, once assigned to an ACO, all the costs associated with a beneficiary will be attributed to that ACO, even care received outside the ACO. If true, then in theory ACOs could “game the system” by attracting rivals’ beneficiaries for high margin specialty services, run them up with all manner of ancillary services, collect the FFS payments, but stick their rivals with the attributed costs. Is this possible in principle? Note that beneficiaries might like this very much (even if it isn’t good for them). They are not obligated to receive all their care from the ACO to which they are assigned. Why would they not be attracted to a provider outside their ACO if that provider is willing to do more? Under the “more is better” (false) hypothesis, I don’t see why not. Has my thinking gone awry somewhere?

    Many thanks in advance for answers and pointers.

    UPDATE: Brad Flansbaum drew my attention to a Health Affairs blog post by Ron Klar, which includes this passage:

    Additionally, this creates a real possibility for unacceptable intra-Medicare “cost-shifting” by an ACO to non-prospective-possible beneficiaries, especially those who become hospitalized by non-ACO physicians. That is, ACOs could increase the amount and intensity of services to beneficiaries to whom the ACO was or is not also providing primary care. Finally, by knowing that the “retrospective-reconciliation” will be forthcoming, ACOs might be tempted to try to “manage” their risk for these possibly-assigned beneficiaries by minimizing primary care services to their highest utilizers and maximizing these to their lower utilizers. I find even the possibility of this incentive very disturbing.

    Klar’s analysis pertains to the Medicare Shared Savings Program proposed rule. The final rule was issued months after his analysis. I don’t know if anything has changed to alter Klar’s thinking. If I could find an email address for him, I’d ask him.


    • ACOs provide opportunity for all the same problems that manifested under HMOs/PHOs and the like. Nothing in the regualtions prevent a repeat.

      Most of the ACOs are being set up by the same hospitals that have been gaming the system and abusing employers with 300-500+% profit margins. To think they are suddenly going to reform their ways is naive. Instead of Primary Care possibly providing a check to the excessive hospitals the government has now created a system where the primary care has either been bought out by the hospitals or beholden to them for participation in the ACO.

      The latest Milliman sudy and all the data for the past 5+ years clearly shows hospitals are the problem when it comes to cost. The governments solution is to weaken the fewer counter forces and to give the hospitals even more power and control.

    • Hard to see how an ACO would manage this “stick it to the rival” strategy. It would require them to know who is going to be attributable to the rival and who is going to be attributed to them. Since attribution is retrospective this would seem impossible to do without access to ongoing data on where the beneficiary is getting his or her primary care services.

      What is most concerning is that participants in the ACO — getting paid FFS — still may have more incentive to provide services (the FFS bird in the hand) rather than conserve and hope for a payment from the ACO based on a bonus that ACO might get (the bonus bird in the bush).

      • It requires only that an ACO be able to reasonably identify its own patients. Attribution will be largely prospective, with quarterly reporting to ACOs about who is likely in/out. There will be reconciliation at the end of the budget period (yearly, I guess), but that’s probably for the small subset of hard cases. The idea I have in mind is, “Here comes a patient we know isn’t ours. Cool, we can relax and run up the charges.”

        I think this is far-fetched, but it is possible in principle.

        • They already do this based on PPO contracting, why is it hard to believe they will keep doing what they are already doing? Hospitals know which PPO contracts are profitable and which are insanley profitable and treat accordingly. Just last week Cancer Treatment Center of America stopped treating one of our members mid cancer treatment becuase they were only making 12% profit.

    • IMHO, this is going to be a big mess!!!

    • We have a number of clients who got tired of getting gouged by hospitals so their plans only pay hospitals cost + 12% or Medicare + 20%, whichever is higher. We received an appeal today from a hospital unhappy with the payment.

      Exact wording from appeal;

      “We do NOT accept Usual and Customary and we will hold the patient responsible for the charges not processed by your company. Please send us correct payment of 100% of charges, or a corrected EOB showing patient responsibility.”

      None of that really means anything until you break down the numbers. They billed $14,751.71. We paid them $4,365.09.

      The hospital’s cost to deliver that $14,000 in care, as they report it to CMS, was $3,208.15.

      Medicare would have paid $3,637.58. Since Medicare + 20 was more then Cost + 12 we paid them what Medicare would have paid them plus an additional 20%. That is roughly 36% profit margin.

      That isn’t good enough, as you can see from the letter they are demanding the full $14,000. That would be 360% profit, or they go after the employee.

      This is who Obama wants to put in charge of controlling cost. Instead of mitigating the power of hospitals to engage in activity like this Obama and those who support the ACA are eliminating any counter forces and giving more control to the organizations that are the very problem.

      • I believe this is in part due to the problem of not directly making clear what certain services costs in a hospital.

        There is probably a reason why hospitals mark up the bill so high. Insurance companies reimburse hospitalizations differently- the rates are different and the services that are reimbursed are also different. Some reimburse per diagnosis, number of days stayed, or per service or how have you. Because of this complex system of reimbursement when you are dealing with so many different players, the hospital puts anything that may be reimbursed on every bill, regardless of what insurance the patient has or does not have.

        In effect, insurance companies will not pay for services they don’t cover and will certainly not pay more if the hospital happens to leave something out. Different insurance companies pay hospitals whatever they please and whenever they please to do so (as they often deny or delay payment for reasons such as incorrect paperwork, etc.) This causes hospital billing to not be a normal operation as they never really know what they are going to get. Unfortunately, this REALLY hurts those that are uninsured or patients where their insurance company will not cover a certain hospitalization for whatever reason.

        The hospital therefore plays the insurance game.

        *This opinion has been garnered through my recent reading of The True Cost of Healthcare by David Belk, MD, and I have paraphrased much of it.

    • Beneficiaries are assigned on a prospective basis using a two-step process.

      1. Beneficiaries are first assigned to ACOs on the basis of those primary care physicians participating in the ACO that provide a plurality (allowed charges) of defined primary care services

      2. If assignment is not possible under step one, then an attempt will be made to assign the beneficiary to an ACO on the basis of receiving a plurality of primary care services from physicians and other healthcare professions (e.g. nurse practitioners, physician assistants) participating within the ACO.

      CMS will then update the list of preliminary prospectively assigned beneficiaries during the performance year, and at the end of the year will reconcile the list to reflect beneficiaries who actually meet the criteria for assignment to the ACO during the performance year.

      this was a difference from the interim rule which was retrospective attribution (method used in PGP demo)