Growing up in and around Philadelphia, I have special insight into watching things crumble and decay. Despite the fact that the city and the surrounding area is filled with historical landmarks, making sure that many of them stay intact becomes more difficult with each passing year.
As an example, Independence Hall has had termite problems in the past, but thanks to the will of many, a large infusion of cash and an overhaul, it remains standing. When a building of such importance becomes threatened, it falls within the common interest to save it. To put it simply, desperation turns into positive action.
There is quite a different outcome when something is widely seen as unpopular and not worth the time and investment. When the public will and the money can’t be found, whatever is trying to be saved is usually facing an inevitable appointment with a wrecking ball. All the while, the interested party trying to save it will be much like Kevin Bacon at the end of Animal House, pleading with everyone to “Remain calm. All is well“. In real life, it is with an equal mixture of pity and gallows humor when we watch someone be in denial about something that is obviously failing and beyond saving.
An announcement this week from CMS of three new initiatives demonstrated this principal in rather stark terms. Not long ago, CMS released the proposed rule regarding Accountable Care Organizations (ACO). To say that the proposed rule was met with skepticism and indifference is an understatement. The large upfront costs of setting up an integrated health model has made the idea of an ACO a non-starter, despite the promise of savings and incentives for such at the end of the road.
One of the initiatives announced this past Tuesday was called the Advanced Payment ACO. The purpose of this type of model would be to make a portion of the projected savings from an ACO available to an organization setting up an ACO in order to cover a portion of the upfront costs of forming such a model. CMS is accepting public comments on this initiative until June 17th, which can be submitted here. Being that I have a little space, allow me to share my public comments on this initiative in this forum.
You have to have pity for poor Donald Berwick. He became the CMS chief through a recess appointment due to continuing negative attitudes of Republicans in the Senate toward the President and any of his ideas. It has already been announced that he will not be renominated prior to the expiration of his term at the end of 2011. No Democrats in the Senate are defending him as he tries to remake Medicare from a program riddled with waste and inefficiency to one with any semblance of a salvageable financial future. He has been left to twist in the wind until his clock runs out. It leaves those of us in the public with an impression of him as a crazy uncle at Thanksgiving, spewing forth ideas that are neither welcome nor appropriate to the circumstance. It is a view of him that, based on his past accomplishments, isn’t fair in any sense of the word.
Yet here we have Dr. Berwick, left to his own devices on his Speaker’s Corner pulpit, preaching the ACO gospel to an audience doubly armed with skepticism and rhetorical tomatoes, as the clock continues ticking, now promising to pay for ACO formation up front by taking the savings from the end of the rainbow.
The American Hospital Association released a study this week that showed that the costs of forming an ACO could range from $11.6 to as high as $26.1 million, which is significantly more than CMS’ estimate of $1.8 million. The AHA’s conclusion to the study stated that the shared savings rate needed to be adjusted to encourage participation in the ACO model. As an illustrative question, if 100 Advance Payment ACOs are formed, is the federal government ready to spend up to $2.6 billion on the hope that there is a pot of gold at the end of the rainbow? Further, would this be a welcome announcement to the general public in a country with a current true unemployment rate of 15.9%?
I have one other simple question; what if, after the ACO is formed, despite all efforts, no savings is realized from the model? Worse yet, what if neither savings nor improved coordination of care develops? The answer to these questions, as far as I can see, is that we just took a few million dollars per accountable care organization and set them on fire.
The final rule on ACOs has yet to be written, but desperate panic and a traveling medicine show sales pitch rarely add up to good strategy. The house of cards that is the ACO model is showing signs of instability, and CMS’ sneezing, in the form of the Advance Payment ACO Initiative, is not saving it from crumbling. Mr. Berwick, do not remain calm. All is not well.