What is an ACO, Anyway?

by Hamilton E. Davis

   One of the most severe challenges confronting health care reform in Vermont and the United States is the fact that reform proponents speak a different language from day-to-day English. The essence of reform is changing the way money flows into the system so as to change the economic incentives for doctors and hospitals. People who specialize in health care reform understand that and they have developed ways to talk about it to each other. The problem is they talk to the non-specialists the same way.
   To the press, legislators and the public, the language of the priesthood is incomprehensible. The insiders are industrial-strength professionals. Many have advanced degrees in the field. They spend every day at it, and most of them have for years. The rest of the folks, especially the legislators, are amateurs. Many are intelligent, but they are decidedly not trained; they have no professional staff; they have a governor who is hiding from the reform issues; and the legislators who are specifically assigned to deal with reform directly don’t understand the health policy creole any better than their colleagues.
   Some of that is inevitable: any complex, technical matter can be difficult to grasp easily, or quickly. It is also true, however, that the language of the health reform priesthood has evolved in such a way that it deflects inquiry and thereby masks complexity; and, more importantly, reduces the political pressure that inevitably attends major cultural and financial change.
   Following is the kind of thing you hear when the priesthood talks to the congregation. “We need to shift the financial incentives by moving to alternative payment models…we need to shift from fee-for-service reimbursement to value-based payment…we need to shift from paying to cure people after they are sick to keeping them from getting sick in the first place…we need to focus on wellness, not expensive therapies.”
   That effectively shuts down the instinctive resistance to change: who can object to getting value for what you pay? And who wouldn’t rather stay healthy on the cheap than undergo powerful medical therapies that cost a ton of money and involve getting stuck with needles and sliced up with scalpels and made to take horrible-tasting stuff that makes your hair fall out?
   At that point, the priest, or priestess, is off to the races, laying out the intricacies of ACOs, and attributed lives (which actually has nothing to do with “coverage”), and MIPS and MACRA, and multiple payers versus single payers, and one-sided risk compared to two-sided risk, and how CMS (or CMMI) looks at things rather than how DVHA wants its contracts compared to how Blue Cross looks at the whole hairball. All of which sails right over the heads of the congregation, and leads to the confusion and angst that have hung over the legislature for the last few weeks.
   I believe real understanding has to start with what an ACO is. ACOs are the mystery meat of reform. After seven years of work on this issue, you hear questions in the legislature like: “Why do we have to have an ACO? Will I be covered by the ACO? Should we write letters to patients to tell them they are in an ACO, or would it be better to put a sign to that effect on the doctor’s waiting room wall. Questions like these flummox the professionals because they have no relevance to the real issues.
   So, a suggestion on a new way of talking about an ACO:
   An ACO is just a business device that allows a group of hospitals and doctors to deliver a full range of acute medical services to a block of patients for a fixed price per person. That’s it—fixed price contracts, which is the only way to get health care costs under control.
   It’s not that complicated; it’s the kind of thing that ordinary people do every day. They buy stuff -- lawn mowers, cars, ice cream cones. The stuff has to be good enough, or they won’t accept it. The price has to be right, or they won’t pay it. If a person wants to build a garage, he or she finds a guy with a pickup truck, a chop saw, a nail gun and strong forearms. The buyer makes a deal with the pickup truck guy to build the garage for a specific (fixed) price that both can live with.
   There is an alternate way, however. You can hire the guy for “time and materials.” Whatever volume of supplies the guy buys, at whatever price is most convenient, you pay for. You’re paying the guy by the hour, so the longer it takes him, the more he gets paid. Congratulations. You have the most expensive garage in your neighborhood.
   We have been buying “time and materials” health care in the United States for 300 years, and since 1966, when Medicare and Medicaid put a blowtorch under the demand teakettle, it has been killing us. Before the federal and state governments began paying for medical care for the elderly and the poor the country spent 6.6 percent of its gross national product on health care. That number nationally is around 18 percent, and in Vermont, it’s 20. That is why Americans pay twice as much for health care as do the citizens of other fully developed countries—for worse results.
   Fixed price contracts are, by a very long reach, the best way to turn this malignant tide. Federal law established ACOs as the vehicle to make such contracts possible in a very complex industry. If there is a consensus understanding of what the Vermont ACO is, then the at least the profusion of issues that arise in the legislature’s deliberations can begin to focus on real questions:
   So, how has it worked so far? Are patients included in fixed price contracts getting the care they need? Is there any evidence that patients included in the 2017 fixed price contracts got deprived of necessary care? What is the effect of the new contracts on the cost of care in the state? What are the barriers to expanding the project to meet the federal requirements for Medicare participation…how should we deal with primary care as opposed to hospital-based care?
   There will be an avalanche of such questions, but if there is a common understanding of what the ACO is, at least the forum will consist of a conversation instead of cacophony. And perhaps, slowly, the professionals and the amateurs will learn to talk to one another.
   Trust me, that would be a very good thing.