Political Debate Over Accountable Care Organizations Heats Up

BY Betty Ann Bowser  May 24, 2011 at 5:53 PM EDT

Ever since the federal government rolled out its proposed rules for setting up Accountable Care Organizations in March, it’s been one piece of bad news after another for the Obama administration. Now comes another blow on the political front.

Seven influential Republican senators wrote a letter to Health and Human Services Secretary Kathleen Sebelius and Medicare Chief Dr. Don Berwick on Tuesday demanding that the proposed ACO rules be withdrawn. The senators believe the rules are “unworkable,” and said “we conclude that the proposed ACO regulation will fail to accomplish its purpose.”

The letter was signed by Tom Coburn of Oklahoma, Jon Kyl of Arizona, Mike Crapo of Idaho, Mike Enzi of Wyoming, John Cornyn of Texas, Pat Roberts of Kansas and Richard Burr of North Carolina.

In a written statement released by Enzi’s office, the senator said the Centers for Medicare and Medicaid Services “has not been able to ensure that ACO’s will actually help provide better care and lower costs and not drive up prices by reducing competition among providers.”

Said Coburn:

The letter I signed today echoes the reservations of health professionals who have expressed deep concerns about the well-intended, but ultimately unworkable, ACO regulations recently proposed by the Administration. It is certainly my hope that the Administration will not misread this letter as partisan, but will work to address the underlying problems of misaligned incentives and regulatory uncertainty that have elicited such concern by a range of health care institutions and providers. If the Administration withdraws the regulation, they will find strong bipartisan support among Congress and stakeholders to craft a proposal that encourages broad participation in innovative models to achieve lower costs and better care.

Even though provisions to set up Accountable Care Organization take up about seven pages in the federal health care reform law, Obama administration health officials have a lot riding on them. They say ACOs offer a new way to deliver health care — offering financial incentives from the government to hospitals and doctor groups that work together, coordinating care for Medicare recipients while lowering costs.

But both hospitals and doctor groups complain proposed rules would create more financial risks than rewards, and that the reporting requirements are too onerous.

First, major physicians organizations had a lukewarm reaction to the ACO regulations. Then, participants in a Department of Health and Human Services demonstration project on ACOs said it didn’t think most of its members would buy in.

This was especially bad news for Medicare Chief Don Berwick. He and other officials at the Centers for Medicare and Medicaid Services had thought organizations that took part in demonstration project would be on board because the results of that program showed Medicare saved over $38 million in the years of the pilot program, and the medical groups that participated got performance payments from the feds totaling over $31 million. And among those participants were some of the most prestigious integrated medical systems in the country, including The Mayo Clinic, The Cleveland Clinic and the Geisinger Health System in Western Pennsylvania.

Pushback has also come on the money front from the American Hospital Association, which estimated that start-up costs to form an ACO could reach up to $26 million in the first year alone. The proposed ACO regulations from HHS estimated that number to be closer to $1.8 million.

On May 17, CMS Chief Berwick announced provisions for integrated systems like Geisinger and Mayo that would allow them to get more federal money for taking part in ACOs than originally proposed by agreeing to take on more financial risks. Berwick also announced a new “Pioneer” ACO model for less-mature health systems that would allow them to pocket some of their anticipated savings up front.

HHS will continue to accept comments on all of this until June 17.