Health Policy$ense

Still Looking for That Unicorn: Latest ACO Study 'Misleading'

Interview With Wharton Health Care Management Professor Lawton Burns

The news from the latest ACO study in JAMA seemed good; not only could ACOs save money in commercially insured patients in Massachusetts, the savings were "contagious," spreading to non-ACO Medicare patients seen by the same providers. The Washington Post reported that "ACOs may actually be the unicorns we've been waiting for, spreading their cost-saving magic throughout the health system."

I spoke with LDI Senior Fellow Lawton R. Burns, Professor and Chair of the Health Care Management Department at Wharton, about the news. Last year, Burns and colleague Mark Pauly had written in Health Affairs with skepticism about whether ACOs could deliver on their promise of controlling costs and improving quality.

Q: So has this study changed your mind about ACOs?

Lawton Burns
Lawton R. Burns, Professor and Chair of the Health Care Management Department at Wharton, says the latest ACO study in JAMA is misleading.

Burns: Well, the title of this article by Michael McWilliams and colleagues is "Changes in Health Care Spending and Quality for Medicare Beneficiaries Associated With a Commercial ACO Contract." But what they're actually studying are provider organizations in Massachusetts who have contracted with Massachusetts Blue Cross/Blue Shield in what's called the Alternative Quality Contract. And, you know, to call this a commercial ACO contract, I think that's wrong. It's a commercial HMO contract with global capitation.

Q: What makes this an HMO and not an ACO?

Burns: Massachusetts Blue Cross/Blue Shield put about a quarter of its HMO and POS enrollees into this massive network of HMOs which goes under the label "alternative quality contract". The reason I call it an HMO is that the provider organizations are under global capitation for all expenditures; it's a closed network model such that enrollees in those alternative quality contract plans have to use the designated provider or they face huge penalties for going out of network. So it's basically like the HMOs of the 1990s, with global capitation. A blast from the past.

Typically, ACOs are not globally capitated -- it's more like a shared savings model, most of which are taking only upside risk -- and they don't have a closed network. HMOs take both upside and downside risk. Enrollees -- they're not even enrollees -- the patients who are attributed to the ACOs in the Medicare model are based on where they have the majority of their provider visits and things like that. The ACO, however, has no penalties for going outside [the network] and, in fact, the ACO can't restrict you from going outside. So the AQC is not like an ACO -- it's more like an HMO. Now that's three different TLAs -- Three Letter Acronyms -- and people obviously aren't keeping these things straight.

Q: What does this paper mean for the likelihood of ACO success?

Burns: The paper is comparing Medicare fee-for-service beneficiaries seen in provider organizations participating in the AQC with Medicare fee-for-service beneficiaries seen in providers not the AQC. And so they're noticing a difference there. Now neither of those groups they're comparing are in an ACO. The Medicare beneficiaries in the fee-for-service world are being seen by these AQC providers, who are working basically in an HMO environment. The difference in the costs is spillover from the commercial side of the AQC providers to the Medicare side of the AQC providers. So what's misleading is that none of this has anything to do with an ACO.

It suggests that once the providers hit a threshold level in their global capitated model, they start treating other patients the same way as their capitated patients. There's evidence from the 1990s documenting spillover effects from HMOs to non-HMO patients. That's what we have here -- basically a repetition of the findings we already had in the 1990s, and demonstrating that we have spillover effects, again, once we resurrect the HMO model.

Q: And so you're saying that this doesn't tell us much of anything about what will happen in ACOs?

Burns: It doesn't say anything about ACOs. It's a commercial HMO contract with global capitation. You know, that was the extreme version of managed care in the 1990s. That's the thing that the U.S. population rebelled against because they didn't like the closed networks and they thought that providers operating under global cap were restricting their access to specialists and the hospitals they preferred. That's why HMO enrollment nationally, as a percentage of the employee population, plummeted after 1996 -- because of the HMO backlash. The enrollees hated the restrictions on who they can see or not see. Now when Obamacare was passed, they studiously avoided the word HMO or closed network -- it was all free choice, you could see any hospital or doctor you want. This is why these two things are two different beasts.

So I think this is, you know, at worst misrepresentation and at least misleading to those people who want to set up ACOs and think they're going to get these kind of results. I don't think they're going to. I think it's going to be encouraging people to do these things and they may incur some big losses on it.