ACO Payments May Hinge More on Geography than Quality

John Commins, for HealthLeaders Media , May 2, 2012

"That is because spending growth in one time period does not seem to be correlated at all with spending growth in another time period for a given area," McWilliams says. "For an organization deciding whether or not to participate in these ACOs, it would be unclear to them whether or not it would pay off."

McWilliams and study coauthor Zirui Song suggest instead that the federal government rely more on local growth factors to gauge spending targets. "There would be less of this problem of gains or losses for the organizations that are unrelated to their efforts to lower costs and improve quality," McWilliams says.

McWilliams says the study did not directly examine the affect of the HRRs on rural ACOs, but he identified some vulnerability.

"The variation in spending growth had two components. One was a random component that’s due to changes in healthcare needs of Medicare beneficiaries from year to year," he says. "The other is a more systematic component and the result of market forces that drive spending growth in particular areas. For example, if provider organizations are competing on the basis of attracting the latest and greatest technology to attract patients, spending growth ought to be uniform in the area."

"I would not expect the systematic component to be any more variable in rural versus urban areas," McWilliams says. "But clearly the random component would be because rural areas are more sparsely populated. A prospective ACO in a rural area would probably face a bigger gamble in terms of a one-year loss or gain that is due to the payment methodology than would an ACO in a more densely populated area."

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1 comments on "ACO Payments May Hinge More on Geography than Quality"

Mike Barrett (5/3/2012 at 12:32 PM)
So, why does one area expense grows faster than another? Iowa doesn't seem to be fatal for seniors yet the costs there are very low compared to other locations... why? At some point this needs to be answered - if we don't already know what the answer is. And the difficult confrontations be made and resolved. ACOs begin the process of having providers meet, face to face, and explain why their practice patterns are different (for good or bad) from the admittedly ever evolving standard or best evidence of care. That medicine must move from an "art" to a science for the vast majority of care. Medicine should, if not must, expand their vision of the "M" in E&M codes to beyond the office visit. We tell a lawyer they have a fool for client if they advocate for themselves in their specialty. Yet, we expect the patient to advocate for themselves in the far less mature world of healthcare. We can and simply must do better for patients. ACO are most likely not the endpoint, rather an important next step in the evolution of the health care system.




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