In yet another sign that the huge debate stirred up by Donald M. Berwick, M.D., and Richard Gilfillan, M.D., by their publication on Sep. 30, 2021 of their blog in Health Affairs online, “Medicare Advantage, Direct Contracting, And The Medicare ‘Money Machine,’ Part 2: Building On The ACO Model,” is far from being quieted, yet another pair of prominent healthcare policy leaders has come out with an extremely strong rebuttal to that September blog. This time, the two leaders are Michael E. Chernew, Ph.D., who is the Leonard D. Schaeffer Professor of Health Care Policy and director of the Healthcare Markets and Regulation (HMR) Lab in the Department of Health Care Policy at Harvard Medical School, and Chair of the Medicare Payment Advisory Commission (MedPAC), and J. Michael McWilliams, M.D., Ph.D., who is the Warren Alpert Foundation Professor of Health Care Policy and a professor of medicine at Harvard Medical School. He is also a general internist at Brigham and Women’s Hospital, a Visiting Scholar at the USC Schaeffer Center for Health Policy & Economics, and a senior advisor to the Center for Medicare and Medicaid Innovation (CMMI). Chernew and McWilliams on Jan. 24 authored a blog in Health Affairs online, in its “Forefront” section (formerly the Health Affairs Blog), entitled “The Case For ACOs: Why Payment Reform Remains Necessary.” Essentially, Chernew and McWilliams use their blog space to refute just about everything that Berwick and Gilfillan had stipulated last September, regarding the value of accountable care organizations (ACOs) and the Global and Direct Professional Contracting Model (GDPC), arguing for the value of those models, and also carefully separating them from the elements of the Medicare Advantage program that Berwick and Gilfillan had savaged last autumn.
Chernew and McWilliams begin by stating that “Medicare population-based payment models, broadly known as accountable care organization (ACO) models, of which the Global and Professional Direct Contracting Model (GPDC) is an example, were launched out of recognition of two largely inherent weaknesses of fee-for-service: FFS does not promote efficiency, nor does it promote equity. The Centers for Medicare and Medicaid Services (CMS) and the Center for Medicare and Medicaid Innovation (CMMI) at CMS are in the midst of redesigning ACO models and developing new ones to maintain a portfolio of models as other, similar models are phased out. The evolution of population-based payment models, particularly the launch of GPDC, has spawned recent controversy, with some calling for a halt to ACO programs. For this reason, it is worth stepping back and reviewing the original motivation for these models and their merits (and challenges). It is important to recognize that any policy option must be viewed relative to an alternative, in this case, the traditional Medicare fee for service (FFS) payment system.”
Chernew and McWilliams hit the fee-for-service payment system hard, arguing not only that the evidence is clear that the FFS system encourages the delivery of low-value care, but further, that “This problem is likely to get worse as new modes of care delivery, like telemedicine, grow. The wide array of care that digital health can provide offers tremendous value to patients but is ill-suited to FFS. Defining the unit of service is complex and ensuring program integrity is difficult. We must find ways to ensure access to these services, but it would be difficult to add new codes (and associated rules for how they are used), and to set payment rates that are high enough to support use but not so high as to encourage overuse.” What’s more, while they barely touch on Medicare Advantage, the authors state that, “There is certainly room to lower some prices in the Medicare program (including Medicare Advantage (MA) benchmarks), and reforms in some areas such as prescription drugs can save money while still supporting innovation. Yet, relative to the challenges faced, savings opportunities from fee reductions are modest. In fact, Medicare fees are already set under current law to rise at very low rates. For example, fees for professional services (if clinicians are not in alternative payment models) are scheduled to rise at 0.25 percent in nominal terms.”
Among the authors’ key points:
Ø A core element that supports value is that, “By providing bonuses for lower total cost of care (and sometimes penalties for higher total cost of care), ACOs promote reduction of waste. Moreover, a population-based payment system affords providers greater flexibility in care delivery by removing incentives that favor services which may not be best suited for patients.”
Ø ACO models need to be reexamined in order to provide for enhanced/intensified value, making sure to continue the pattern of generating savings in the use of post-acute care, “an area known for large practice pattern variation.”
Ø “Concerns about ACOs encouraging stinting on care have not been borne out so far. ACO savings appear to have been generated without decrements to quality, access, or limits on freedom of beneficiaries to choose providers.”
The authors acknowledge that, “[I]f benchmarks are set too high or not adjusted for coding effects, ACOs will prosper, not Medicare. Moreover, if programs are voluntary or if ACOs can adjust provider lists, non-random participation can result in higher Medicare spending even if ACOs succeed in reducing utilization. Similarly, if risk is one-sided, savings from lower use that arise by chance will lead to bonuses without offsetting penalties.” Still, they write, “All of these issues can be mitigated with careful design of program parameters and in fact, despite all of these issues, population-based initiatives such as the Medicare Shared Savings Program (MSSP) have resulted in savings to Medicare. Recent incarnations have been less successful because of selective program participation. Clearly, more work must be done to improve model parameters to develop incentives and avoid gaming, and to streamline and harmonize available models. Nevertheless, the evidence of behavior change suggests promise.”
Chernew and McWilliams take particular umbrage at the idea, asserted by Berwick and Gilfillan, that ACOs, including the GPDC model, represent a shift in the direction of privatization. They write that “In some ACO models such as the direct contracting models, the money may flow from CMS to the direct contracting entity and then to providers. This may seem analogous to MA, but it is better understood as allowing cash flows conducive to transmitting incentives to partnering providers, not restricting patient choice. Compared to MA, the control resides more directly with the providers and, as a result, the direct contracting entity can be viewed as a support entity for providers. A preferred provider may assign its cash flow rights to the direct contracting entity, but only under terms agreed to by the provider. Unlike MA, the direct contracting entities’ primary leverage is if it provides value to the provider, as opposed to threats of excluding the provider from its patients’ network.”
What’s more, they write, “More broadly, some have criticized the GPDC model because it involves Medicare contracting with for-profit entities. As with other programs in Medicare, beneficiary protections and guardrails to protect the Medicare program from unintended spillover effects must be in place. Yet, it is worth noting that non-profit entities may engage in deleterious practices. For example, Sutter Health Care, subject of a well-known legal case, is a not-for profit entity. Similarly, private equity acquisitions and surprise billing have unfolded in the context of FFS. Moreover, for-profit entities can add value—as David Blumenthal notes, for example, they may play a role in saving primary care, particularly if given the right incentives. Any payment system is susceptible to exploitation by bad actors,” they note. “Focusing on behavior is more important than focusing on ownership type.”
In the end, Chernew and McWilliams throw the full weight of their argument into support ACOs and the GPDC model, writing that “The American health care system is expensive, characterized by meaningful waste and disparities. The dominant FFS system is an impediment to addressing these issues. Moreover, unless more money is infused into the system, it is likely that fees for professionals and facilities will grow at rates below inflation and input costs. Population-based payment models offer providers the incentive to reduce low-value care and allow them to benefit as that low value care is removed from the system (or not generated in the first place),” they assert. “The models, if successful, will reduce patients’ out-of-pocket costs and promote equity and population health. Of course, the challenges are not small, but the rewards will be significant if we can design models that come closer to their conceptual potential. However, it will take considerable, continued effort.”
