As Congress debates partisan issues such as “Medicare for All” where private health insurance would be outlawed, troubling trends are emerging on healthcare provider consolidation that are driving up costs.
ACOs’ Underwhelming Performance
There is a long-standing belief — particularly in liberal and academic health-policy circles — that physician–hospital integration into larger systems would improve quality of care and bring cost efficiencies. That’s why the then-Democratic Congress created “accountable care organizations” (ACOs) — mostly hospital-led megasystems in the Affordable Care Act. There are now more than 500 such organizations, serving over 10 million Medicare beneficiaries.
How have ACOs fared in delivering lower costs? Poorly.
Harold Miller, president of Center for Healthcare Quality and Payment Reform, analyzed CMS’s August 2018 data dump on ACOs participating in the Medicare Shared Savings Program. He discovered that in 2017, CMS gave nearly $800 million back in bonuses to the 472 ACOs that had spent $1.1 billion less than the benchmark target. It had collected only $57 million in penalties from the 16 ACOs engaged in two-sided risk programs who had missed their targets, netting a grand total of $317 million or about $36 per beneficiary (0.33 percent of total spending) for 2017. Moreover, the ACO program had lost $384 million in the first four years of existence, meaning it “had yet to generate a net benefit to Medicare after five years of trying.”