By Kip Sillivan
Health Affairs, Comment, January 24, 2022
Response to “The Case For ACOs: Why Payment Reform Remains Necessary,”by Michael E. Chernew and J. Michael McWilliams
This defense of CMS’s never-ending ACO experiment is unconvincing. The authors ignore evidence that is inconsistent with their assertions, and the evidence they do cite does not support their claims.
The authors would have us accept these assertions:
(1) There is “a lot” of overuse of medical services within the traditional Medicare program, and the cause of this overuse is the fee-for-service (FFS) method of payment;
(2) ACOs and direct contracting entities (DCEs) are the solution to the alleged rampant overuse;
(3) ACOs/DCEs can improve equity, the FFS Medicare program cannot;
(4) The toxic consequences of ACOs/DCEs (consolidation, upcoding, denial of services, wasting tax dollars on profit for shareholders) either do not exist or can be “mitigated.”
These assertions are wrong or at best inaccurate.
Assertion 1. The authors avoid stating that research supports their claim about “a lot” of overuse. Instead, they assert that the claim “is widely acknowledged” and go on to cite the Choosing Wisely campaign and two studies that contradict their claim.
The Choosing Wisely campaign is a useful educational project, but its website makes it clear that its list of “low value” services should not be construed to be a measure of overuse. The website states: “Choosing Wisely recommendations should not be used to establish coverage decisions or exclusions. Rather, they are meant to spur conversation about what is appropriate and necessary treatment. As each patient situation is unique, providers and patients should use the recommendations as guidelines to determine an appropriate treatment plan together.” Moreover, the website sheds no light on what role, if any, FFS plays in causing over- or underuse of these services.
The two studies the authors cite are one they co-authored (Schwartz et al.) and a “preliminary” report by the Institute of Medicine (IOM). The study by Schwartz et al. examined the frequency with which “low value” services (including some listed by Choosing Wisely) are used within traditional Medicare. For example, Schwartz et al. inquired how often bone mineral density tests are repeated at intervals of less than two years. They concluded that “low-value” services could account for somewhere between 0.6 and 2.7 percent of total spending, and the larger number probably included appropriately used services. The authors made no attempt to compare these small percentages with the cost of rooting out all inappropriate use of bone mineral density testing etc. Nor did they attempt to demonstrate that FFS is the cause of inappropriate use of “low value” services.
The second study cited – the final report by the IOM on the brouhaha about regional variation in spending — did not demonstrate that variation is caused by either overuse or underuse, nor did it determine causes of over- and underuse. As Kaiser Health News noted, the IOM’s “researchers did not provide any definitive answers to the overarching questions about regional variation.” The literature on regional variation in spending should be viewed as a possible source of hypotheses worth further research, not as the basis for any conclusions on the extent and causes of inappropriate use.
Despite a half century of claims that Medicare beneficiaries get too much medical care, and that HMOs, PPOs, ACOs, and now DCEs must be inserted into Medicare to combat overuse, no study has demonstrated widespread overuse within Medicare, and none has demonstrated that what overuse exists is caused by FFS payment.
Assertion 2. The authors’ assertion that ACOs are the solution to the alleged overuse in traditional Medicare ignores evidence that CMS’s ACO programs have all failed to reduce Medicare spending and may increase systemwide spending when ACO overhead costs are taken into account. This failure is due in part to the absence of “a lot” of overuse; the difficulty of distinguishing appropriate from inappropriate use; the poor definition of ACOs; and disinterest in ACO boosterism among physicians and patients.
ACOs have had small and mixed effects on the few (crudely adjusted) quality measures used.
Assertion 3. The authors opine that “the ACO framework can greatly facilitate equity-oriented initiatives by directing more resources for populations with unmet needs” while FFS Medicare cannot. This claim defies common sense and, not surprisingly, is unsupported by evidence. The reverse is true. The method by which ACOs are paid – on a per enrollee/assignee basis – guarantees worsening of disparities because it shifts resources from ACOs and providers that treat sicker patients to those that treat healthier patients. This happens because the per-enrollee/assignee payments require “risk adjustment” to ensure the per-head payment is lower for the healthy and higher for the sick. But risk adjustment is extremely crude (the risk adjuster CMS uses for ACOs and DCEs explains just 12 percent of the variation in spending), and one consequence of crude risk adjustment is overpayment for healthy beneficiaries and underpayment for the sick (see page 30 of MedPAC’s June 2014 report).
Some evidence indicates ACOs respond to the grossly inaccurate risk adjustment of per-head payments by cherry-picking and lemon-dropping doctors and patients.
The authors concede that “[r]isk adjustment is a central component of population-based payment models,” then go on to ignore completely the disparity-worsening impact of crude risk adjustment of per-head payments.
Assertion 4. The authors are merciless in their criticism of FFS, but they can’t find any problem caused by ACOs (consolidation, upcoding, etc.) that can’t be fixed or at least ameliorated. Again, we are expected to accept their evidence-free opinion on these important issues. Their last refuge: They ask us to believe that the toxic consequences of ACOs/DCEs are trivial compared with the alleged epidemic of overuse in traditional Medicare. Reasonable people might be willing to put up with toxic side effects of ACOs/DCEs (consolidation, upcoding, cherry-picking, lemon-dropping, denial of necessary services, higher administrative costs, and diversion of scarce resources to venture capitalists) if we had any evidence that ACOs and DCEs work as advertised. However, the evidence indicates ACOs have failed, and DCEs, which are slightly tweaked ACOs, will fail as well.
In conclusion: If we count CMS’s first ACO experiment (the Physician Group Practice Demonstration which began in 2005), the ACO experiment is now 17 years old. All four of CMS’s ACO programs – the PGP demo, the Pioneer ACO program, the Medicare Shared Savings Program, and the Next Generation program – have failed to cut costs, and have had trivial and mixed effects on the tiny handful of quality measures. It is time to terminate the ACO experiment. The Biden administration should immediately terminate the DCE demonstration, and Congress should repeal the sections of the Affordable Care Act that authorized experimentation with ACOs and DCEs.