Q&A: The wide, deep gulf between ACO regs and reality

By Tom Sullivan
10:22 AM
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The proposed accountable care organization regulations, as they stand today, have drawn considerable criticism for being too much – too expensive, too resource-intensive, too stringent to be realistically achievable.

But even among those healthcare providers pushing back on the requirements, there’s a willingness to change the way they do business, according to Bill Bernstein, chairman of the healthcare division at law firm Manatt, Phelps & Phillips, which works with states and providers on health IT and related public policy issues.

Bernstein spoke with Government Health IT Editor Tom Sullivan about the great divide between the proposed regulations and what providers can actually accomplish, the tricky task of putting a price on forming an ACO, how ACOs overlap with other health IT projects, and the challenges and opportunities unique to states.

Q: Almost every week, another group lashes out at the ACO rules. Why such controversy?
A:
There’s no question that there’s a sense out there the number $1.75 million to start an ACO has no relationship to reality. Most people looking at ACOs are requiring new governance entities and requiring new dedicated staffing to run the ACO, so those are significant costs. And then you have to think about your health IT infrastructure to support the exchange of information and data analytics and all different types of functions that most providers are not equipped to do today. And so if you calculate all those costs, there’s substantial investment required to do this.

Many of the places we’re working with have already started to make some of those investments. People have understood way before the ACO regs that it's important to invest in health IT and to try to connect your doctors and your hospital together through information systems. Part of the cost of ACOs is areas they’d spend on otherwise, so there’s a debate about how much is new cost.

Q: So there’s overlap with other projects they’re working on – what are those areas?
A:
The proposed regs themselves require that 50 percent of the primary care physicians be meaningful users, so there’s explicit overlap. It’s hard to imagine implementing an ACO without a connected health strategy.

Q: What would be the pieces of that connected strategy that then overlap with the ACO efforts?
A:
You need electronic health records, you need health information exchange, and you need data analytics capability, which enables both cost measures and quality measures. You need a sophisticated care management program, which turns the information into actions in terms of following up with patients and caregivers.

Q: The role data analytics will play still needs to be figured out ...
A:
It’s messy. We’re undergoing major upheaval in healthcare right now and it’s hard to rationalize it all and fit all the pieces together, and the expectation on the ACO reg is that the final rule is going to change from the proposed rule in significant ways, so we’ll see if that happens. What I will say is the combination of the HITECH investments, the ACA and a lot of the ACA programs are, at least from my vantage point, causing major change in terms of people’s on-the-ground investment strategies in health information technologies. And how it all gets rationalized, fits together and relates to the payment system, there are a lot of open questions about that – but there’s no question that the world will look different five years from now than it does today.

Q: As part of piecing together that puzzle, there are checks and balances at play with ACOs in that the government has ambitious plans – as a government ought to – and the people who have to meet those criteria are pushing back …
A:
Part of the problem is there’s no question there’s a small part of the American healthcare system that’s really up to the challenge of the ACOs, and I think we’ll end up putting together successful programs and thriving under this. But the real question is: Is it scalable? And beyond being just an interesting way of structuring the delivery systems for a small group of providers who are already far along on this journey, and I think some of the industry criticisms of the regs is that if you look at the initial investment of the risk-reward scenario, people are saying it’s just asking too much, so you’re not going to motivate people to do it. My own sense of this, I think the government is listening and smart and will readjust. If they can change the risk-reward incentives a bit and, frankly, if they could create vehicles for providing some capital for people making the shift in how they deliver and get paid for care, I think they’d get a better result. It’s very, very hard when a provider looks at this, for instance, there’s no money up front and you’re in a shared savings program where the first check you’re going to receive is 18 months after the start of the program. It’s hard to bring that to a board and say we should do this. That’s where people are having problems – and then you’re saying to the board we’ve never done this before and we don’t know whether we’re good at it. Other than a few entities, there’s just too big a gulf between what the regs are asking and what the provider community is capable of or can even be expected to do.

Q: When you talk about that small group, who is included?
A:
I don’t want to name names but I will tell you that in any community we will find provider systems that have created their own Medicaid HMOs, so when you start looking at this, many have assets that could be put together to help forge an ACO. But in the context of healthcare in the United States, it’s still really a small number. Even what the government is saying about the ACO problem, if it's successful, is 4 million patients in the program during the next five years. Even their own numbers suggest it’s not a huge part of the strategy. For an ACO to be successful, you can’t have an ACO for each payer. You really need one infrastructure, one set of quality rules and incentives for all payers. And aligning the payers around a single way of doing business is a really difficult thing to do.

Q: As CMS moves in to the next round of sorting out the ACO regs, do you expect them to soften a bit?
A:
I do, because I think the government is really committed to this and I think they’ll soften. I also think that despite all the criticism – and a lot of it justified – there’s a significant appetite on the part of the healthcare community to rethink the delivery system. If it softens a little, there is a receptivity out there to people restructuring how they do business.

Q: What are the challenges and opportunities unique to states rather than private providers?
A:
States have a significant role. The business of insurance is, of course, regulated by states. If ACOs end up being risk-taking organizations, that triggers regulatory oversight by the state. Some of the shared savings programs aren’t structured in a way that they’re taking risk but I think as people look at this there’s an expectation that, over time, that ACOs may become risk-bearing entities and, you know, that brings issues about capitalization and reserves.

The second thing is that in many states Medicaid is enormous, so if you believe that for ACOs to really flourish they need to be multi-payer, there’s the question about whether the Medicaid programs will follow the Medicare lead and come out with a similar structure to an ACO program, which if they did would be really significant in terms of the ultimate success of ACOs. The verdict is out whether states are going to have the appetite to do this. They’re struggling with so many of their own issues and many states have taken the approach to cost-containment of moving Medicaid beneficiaries into managed care programs. I haven’t seen a state yet that says they’re going to incentivize ACO contracting on how independent managed care companies dealing with Medicaid relate to ACOs. So that’s a big area to watch.

The third area is within state control is that many of them are planning health insurance exchanges, so how will contracting work through health insurance exchanges and will they support ACO-type contracting or not? So insurance regulation, health benefit exchange, Medicaid, all will enormously impact whether ACOs are successful.