Accountable Care Organizations — a debacle of enormous proportions
By Congressman Michael C. Burgess, M.D.
Published October 18, 2011

You could feel the excitement in the air at the Office of the Federal Register in late March as the administration was finally releasing its widely anticipated proposed rule on Accountable Care Organizations (ACOs). Physicians, group practices, hospitals and nurses all rushed to get a copy of the rule, several hundred pages long, and eagerly reviewed every nuance. After providing CMS reams of input on what works in their localities, they got nothing — less than nothing, a pariah.

While there hasn’t been a lot of bipartisanship on health issues, the ideas behind ACOs were a near singular exception. From both sides of the aisle, the concept — to integrate and improve the multiple layers of medical care at an affordable cost to all — has been applauded. In fact, in virtually every state, attempts have been made to plan, develop, implement, improve and broaden such organizations.

After the guiding rule was released, however, a dark cloud appeared over the future of ACOs. The response, from virtually every highly regarded medical organization in America, has been uniformly negative: “disappointing,” “problematic,” “impossible under state law,” “too rigid,” “onerously complex” and “it [the rule] creates a sense of mistrust toward providers in a manner that suggests that CMS would not be a trustworthy and effective partner.” Not my words — theirs.

It’s important to understand that an ACO is, by definition, accountable for a patient’s outcome. Accountable to whom is a different matter. Coordination is about a coordinated healthcare team working closely with a patient and allowing them to provide care, integrate treatment, recognize and treat new problems quickly and effectively, and yield a healthier, more satisfied patient. If that patient receives treatment outside the team, coordination is lost, unwelcome outcomes cannot be anticipated or averted, and costs get out of control. Well-organized team systems keep people healthier, avoid mishaps and cut costs. 

Even before applying for accreditation, the new requirements are onerous. All potential ACO applicants must screen each of its providers, usually physicians, for each and every service, to see if they might pose an antitrust threat. The new screening test determines the share each provider has of the surrounding area’s patients, creating the provider service area. The process is time-consuming and expensive, with few vendors providing technical support.

A great majority of applicants are expected to fail, presumably triggering further antitrust assessments. What’s more, the test itself is questionable. After all this, the Centers for Medicare and Medicaid Services has decided that the rule of reason, commonly used to accept obviously nonthreatening groups, will only apply if the organization maintains official ACO status, and a switch to the private market could suddenly place it in violation of antitrust law. Oddly, CMS is placing itself in a regulatory position, for which it has no legal authority.

CMS claims start-up costs should run about $2 million per ACO. However, most outside experts, who actually run healthcare organizations, estimate costs will be more than five times that — upwards of $12 million. And while CMS briefly mentioned some possible assistance back in July for these costs, they have been noticeably silent since that announcement, and the dollar figure suggested was minimal.

More troubling, CMS wants to govern governing: New governing boards are required, even if one already exists. These boards must give every provider, sometimes hundreds, a vote. This is government bureaucracy promoting redundancy. Further, every individual piece of communication to beneficiaries related to operations, functions and marketing, even phone call scripts, must be submitted to CMS for pre-approval. Criteria for acceptance are not given, nor are explanations for how marketing applies to a system in which patients are assigned, not recruited. Remember, they are accountable for the health and well-being of their patient population. This entire process has to happen fairly quickly for doctors and nurses to give a timely medical answer to their ACO patient population. And let’s face it, when was the last time Uncle Sam ever did anything in a timely manner?

From the burdensome start-up costs, overbearing regulations, continuous antitrust threats, and more than doubling the number of metrics that even CMS’s best trial struggled to meet, CMS is facing a debacle of enormous proportions the implications of which could be staggering. The final rule could come out at any time, and I only hope that the agency completely scraps the approach taken in the proposed rule. We still have a chance to realize the promise of ACOs but that window of opportunity is closing — and CMS shouldn’t be the one to slam that window shut.

Burgess, a physician, is vice chairman of the House Energy and Commerce Committee’s Health sub-panel.