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● Accountable Care Organizations

ACOs set to expand


cost savings Looking for proof that ACOs will work? It already exists. By Miles Snowden, M.D.

he rap on accountable care organizations (ACOs) is that there is no evidence to demonstrate they will control costs. I’d say the evidence is right under our noses – right in an analysis by the

Congressional Budget Offi ce (CBO). Earlier this year, the CBO published an assessment of the Centers for Medicare & Medicaid Services (CMS) demonstra- tion projects on disease management, care coordination and value-based payment. T is demonstration project provided a venue for disease management suppliers to demonstrate their programs’ ability to impact the costs of Medicare ben- efi ciaries. T e CBO was unimpressed with the value of these programs for Medicare benefi ciaries. But medical profes- sionals engaging in the physician-directed population health management typical of ACOs will see a diff erent message in this same experience. One sub-group of the CMS demonstration pilots pro- duced dramatically better results than the group as a whole: the pilot programs that included substantial direct interaction between care managers and physicians. With these types of programs, patient outreach – both the timing and the condi- tion focus – was determined by treating physician discretion rather than automated system prioritization. T ese programs, in fact, produced impressive results. Hospital admissions de- clined 7 percent and overall costs declined 6 percent among Medicare benefi ciaries enrolled in pilots that included this type of collaboration. T at’s big. Using the projected $8,600 average cost per fee-for-service Medicare benefi ciary in 2010, that’s a savings of more than $500 per person, per year. Of course, this will be no surprise to most physicians, and it is exactly the essence of the ACO-based population health management approach. Yet this success was hardly noticed. Why?

12 January 2013

Miles Snowden, M.D., is chief medical officer, OptumHealth. For more on

OptumHealth: www.

T e CBO valued the pilot programs by savings net of

program costs. T at’s the right way to do it, except when you are measuring pilots designed to identify new strategies for further exploration. T ese pilots were implemented under very tough condi-

tions. T ere was little data shared on the Medicare popula- tion being managed. Only very small portions of assigned Medicare benefi ciaries were included in the pilots for each disease management program supplier. Finally, there was no assurance provided that any up-front investment might be rewarded by a longer program engagement. No data, no scale and no meaningful client commitment to program dura- tion leads to fees in excess of value. In short, program costs were far higher in these demonstration projects than they would be in an ongoing program, such as in a well-functioning ACO. The CBO indicated that program costs averaged at least 11 percent of beneficiary costs – meaning the pi- lot programs on average cost more than $900 for every Medicare beneficiary enrolled in the plans annually (based on our same 2010 Medicare cost estimates). Of course, this is an incredible amount of program expense, much more exaggerated than real program expenses in similar, more mature programs, such as Medicare Ad- vantage programs.

Aligning care management programs to physician care planning lowers costs.

What this CMS experience shows is that aligning care management programs to physician care planning lowers costs. T e evidence already exists. Accountable care organiza- tions are set to expand that proof.


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