NCPA - National Center for Policy Analysis

Health Care Initiative Draws Fire

June 6, 2011

The effort to create new health care entities, called accountable care organizations (ACOs), has hospitals and doctors pushing back.  The idea is that the ACOs would be more efficient than many providers are today, with the resulting savings being shared by the providers in the ACOs and the federal government, says the Wall Street Journal.

  • Hospitals and doctors say they agree with the goals of the program, and a number are moving forward in similar partnerships with private insurers.
  • Several said they are much more likely to apply for a separate Medicare ACO initiative that is aimed at larger providers and limited to 30 groups.
  • Hospitals and doctors complain that the regulations are overly prescriptive, with detailed requirements such as 65 quality measures; the design could mean steep start-up costs.
  • The Medicare agency estimated average start-up and first-year operating costs at around $1.8 million for a new organization, and suggested it might help with financial advances against later shared savings.
  • But the American Hospital Association projects the "order of magnitude is significantly different," likely more than two or three times higher, says Richard Umbdenstock, its chief executive.

Some health care providers say the broader ACO proposal is unworkable.  A letter from 10 medical groups that participated in an earlier, similar Medicare demonstration project said it would be "difficult, if not impossible" to accept the financial design.  The American Medical Group Association said a survey of its members found that 93 percent wouldn't enroll as ACOs in the main proposed Medicare program.

Source: Anna Wilde Mathews, "Health Care Initiative Draws Fire," Wall Street Journal, June 3, 2011.

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