What If? Accountable Care Organizations and Repeal of the ACA

State of Reform is proud to launch, in collaboration with the Univ of Washington School of Public Health – Health Policy Center Initiative , a series titled “What If: A Post-Supreme Court World.”  This is the third piece in a series of contributions hosted on our news site, by a range of authors, about the possibilities for health care in a still hypothetical world after a Supreme Court decision.

One of the major cost control mechanisms created by the federal Patient Protection and Affordable Care Act (ACA) are Medicare Accountable Care Organizations, or ACOs. The basic mechanics of the program are that a health care organization is held contractually accountable for the cost and quality of a defined population of patients (at least 5,000 Medicare beneficiaries) and can share in up to 60 percent of any cost reductions achieved.

The level of savings is based on meeting a complex array of quality performance standards. Patient assignment to an ACO is retrospective, made on the basis of the provider tax ID number (TIN) used to bill Medicare for the majority of the patient’s primacy care services. Patients are free to seek services from any health care provider licensed by Medicare – a major difference from the restricted provider networks in the current Medicare Advantage plans.

Section 3022 of the ACA authorized the Medicare Shared Savings Program, which is also known as the Accountable Care Organization section. At present, there are 27 Medicare-certified ACOs beginning operation in 18 states (announced on April 10) with another 50 organizations applying to begin operation as Medicare ACOs in July. In addition, 32 “Pioneer” ACOs have been operating since January under a pilot program run by the Center for Medicare and Medicaid Innovation (an agency created by Section 3021 of the ACA).

Pioneer ACOs have slightly different requirements than regular Medicare ACOs and are mainly large, hospital-based health care systems. If the entire ACA is overturned by the Supreme Court, the authority for both of these programs would be eliminated and the 59 existing Medicare ACOs – certified and pioneer – presumably discontinued (…contract termination provisions still to be determined).

How this would impact Washington State is uncertain. None of the existing ACOs is within 1,000 miles of our state: the nearest is in the San Francisco Bay Area; most are east of the Mississippi.  Local organizations are apparently taking a “wait and see” attitude about Medicare ACOs (although one or more may be in the next round of applicants).

This cautionary stance may be due in part to their negative reaction to the initial draft Medicare ACO regulations, released about a year ago, and continuing skepticism that the final regulation (published on October 20, 2011) would be financially advantageous to organizations with a prior history of efficient care delivery. If the ACA is repealed, it will certainly further dampen local enthusiasm for Medicare’s version of affordable care concepts and the complex shared-saving mechanisms that implement them.

Commercial insurers in Washington State, and a few of the larger third-party administrators for self-funded employer plans, are working quietly, out of the spotlight, to test alternative payment mechanisms that contain many ACO-like concepts. Unlike private health plan efforts in the eastern US (New York, Massachusetts, and Indiana, for example) our local insurers are not offering these payment approaches on a wide-spread basis.

Instead, they are testing them with a few carefully selected clinical partners. How quickly these payment alternatives spread in Washington State remains to be seen, but a repeal of the ACA seems likely to have only a limited impact on the long-term success of these private sector cost-containment efforts.