Mixed Results for Accountable Care Organizations

Published October 9, 2014

One of the more interesting things about Obamacare (and by “interesting” I mean “would be hysterical if it wasn’t likely to louse things up so badly) is the planners’ infatuation with something called accountable care organizations (ACOs). While there is some variation in how they are set up, the basic concept is fairly simple: a group of doctors and medical facilities agree to try to coordinate their efforts in an attempt to improve care while cutting costs, and share in any savings if costs decline or at least grow less than expected.

In theory, there’s nothing wrong with this – having different doctors who are working on the same patient, particularly those with complex health needs, is almost always going to be an improvement over the alternative.

But of course, in today’s bureaucratic, government-directed health system, even as simple an idea as “doctors should share information” gets turned into something rife with unintended consequences. In this case, ACOs are in many ways indistinguishable from HMOs, where too often (at least in the 90’s) the incentive of doctors and medical facilities was to either withhold treatment or substitute low-cost options over what the doctor believed was the appropriate treatment.

There are two main reasons the Obama administration and Congressional Democrats jumped on the ACO bandwagon when crafting Obamacare.

First, it fits with their view that central planning is vital to any endeavor – every time you hear a politician moaning about ‘fragmented care’ in the U.S., understand that what they mean is ‘bureaucrats aren’t in charge.’

Second, because ACOs supposedly save money, it allowed the administration to spin their abacuses and proclaim that Obamacare would save billions of dollars a year.

The early results of the push to put more patients, doctors, and facilities into ACOs are now coming in, and it’s hard to conclude the original optimism was justified.

Here’s how Modern Healthcare summarized the results in a story posted online yesterday:

CMS posts long-awaited Pioneer ACO quality and financial results

The CMS published for the first time the quality and financial performance for individual Pioneer accountable care organizations, a small, select group enlisted for Medicare’s most ambitious test of the payment model. First year financial results show health spending slowed as much as 7% among some ACOs and accelerated as much as 5% for others. In the second year, health spending slowed as much as 5.4% among those that reduced patients’ medical bills and accelerated as much as 5.6% where costs escalated…

It’s way too early to call the ACO experiment a bust, but these results aren’t exactly worth celebrating. It’s my understanding that many of the ACOs participating in the Medicare experiment were those that had already embraced the concept before Obamacare even passed, meaning they should be the ones most likely to succeed in lowering costs while delivering high quality care. The mixed results strongly suggest it’s probably not yet time to book the tens of billions of dollars in savings that ACOs are being counted on to deliver.