CRS Report on ACOs

A new Congressional Research Service (CRS) report offers clarification about accountable care organizations (ACOs) and the Medicare Shared Savings Program (PPACA Section 3022). The Congressional Budget Office (CBO) estimates that the Medicare Shared Savings Program would reduce Medicare expenditures $4.9 billion from FY 2013 through FY2019 period. Key findings in the report include:

1. Physicians will play a key role in ACO performance:
   CRS defines ACOs as collaborations that integrate groups of providers, such as physicians (particularly primary care physicians), hospitals, and others around the ability to receive shared-saving bonuses from a payer by achieving measured quality targets and demonstrating real reductions in overall spending growth for a defined population of patients. Note: CRS bases this definition on the Aaron McKethan, Mark McClellan, Elliott Fisher, et al., definition, and CRS puts emphasis on physicians’ involvement noting “physicians’ control (directly or indirectly) affects 87 percent of all personal health spending.”
   Source: Lawton Robert Burns and Ralph W. Muller, “Hospital-Physician Collaboration: Landscape of Economic Integration and Impact on Clinical Integration,” Milbank Quarterly, vol. 86, no. 3 (2008), p. 377, citing A. Sager and D. Socolar 2005. Health Costs Absorb One-Quarter of Economic Growth 2000-2005. Boston: Boston University School of Public Health
2. ACOs should be provider-led:
   According to the report, although the composition of ACOs may vary geographically, reflecting local market conditions, analysts conclude that the effort needs to be provider-led. Insurers may be involved but the CRS report suggests their role is supportive rather than primary.
3. There may be difficulties with replicating existing ACO models and market conditions will dictate optimal models:
   The report notes that ACOs have somewhat limited experience in dense urban areas, where the insured have the ability to obtain services more easily from a non-ACO provider and in large rural areas, where the ACO may be a virtual entity and there may be a limited sense of shared commitment across providers spread over a large geographic area.
4. It is not clear how savings would be distributed:
   The CRS report indicates the methodology whereby Medicare savings will be calculated and shared with ACOs remains unclear. Note: CMS is expected to provide details in the next two to three weeks.
5. The impact of ACOs depends on alignment of incentives by the right combination of providers:
   The impact of ACOs on quality improvement and cost reduction will depend on the structure of the ACO to accommodate optimal alignment (physician-hospital, primary care-specialists) and execution of medical management and health coaching of Medicare enrollees.
6. Hospitals are likely to drive ACO development:
   Building on Berenson et al. (2010) analysis, the CRS report noted that hospitals are likely to be drivers of ACO development since physicians are not inclined to share risk or collaborate effectively.