If accountable care organizations (ACOs) accomplish what Medicare hopes they will, they could lead to one of the most important changes in how anyone has paid for medical care ever. That is how ambitious this new payment scheme is.

Of course, ACOs could also crash and burn. The story hook for what’s going on here is a real-life version of an Aesop fable made into a famous children’s book, “Belling the Cat.”

In the fable, the mice complain that the cat sneaks up on them and they have no chance to escape. (Think of health care costs gobbling up federal and state budgets as government officials scurry away helplessly.) A young mouse proposes putting a bell around the cat’s neck to warn of its approach, and everyone applauds. (Think of coming up with an elegant solution to the 30 percent of health care expenditures that are wasted, to treatments guided only half the time by evidence and to poorly coordinated care.)

The tale ends with an old mouse standing up, asking who will bell the cat and being greeted by silence. The moral of the Aesop fable: “It is easy to propose impossible remedies.” In the retelling of the story for contemporary audiences, however, the mice are usually more resourceful and, in the end, successful.

Which will it be for ACOs?

Before examining how journalists can address that question, we need to corral one more animal analogy. Mark Smith, president of the California HealthCare Foundation, is famously quoted as saying: “The accountable care organization is like a unicorn, a fantastic creature that is vested with mythical powers. But no one has actually seen one.”

It’s a great line, referring to the fact that ACOs went from concept to codified in the Accountable Care Act without any intervening demonstration of their real-world worth. Nevertheless, claims of mythical status, while mirthful, are also meritless. As of April 2012, there were 59 Medicare ACOs serving more than 1.1 million beneficiaries in every region of the country, with another 150 applications pending for additional ACOs to begin operations July 1. The private sector is rapidly spawning both ACOs and various accountable care “arrangements,” like the one announced in early May between Blue Cross and Blue Shield of Michigan and Trinity Health, a large national Catholic hospital chain.

ACOs may be awesome or oversold, but the concept certainly has concrete expression.

Medicare’s boilerplate for explaining ACOs to the average person goes this way:

ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.  

For a more in-depth FAQ, see this explanation from Kaiser Health News.

Because doctors and hospitals have to volunteer for an ACO and because most of Medicare remains fee-for-service, you’ll see federal officials allude to the runaway-health-costs problem very carefully.  As a reporter, you can be more forthright.

The ACO has drawn bipartisan support precisely because past efforts to bell the cat have failed. In the fable, and in our political rhetoric, there’s a clear villain. Alas, rising medical costs look a lot less evil when they’re examined one doctor and one patient at a time. There’s no red flag signaling an unnecessary test or prescription, and the fact that the doctor sincerely — if wrongly — believes care is appropriate makes it that much more difficult to perceive a problem.

As a result, if you try to bell the cat of high costs too aggressively, you risk being gobbled up by accusations of rationing care from the beginning of life (the acronym HMO was said to stand for “Heave Mom Out,” a reference to short hospital stays after birth) to its conclusion (the “government death panels” accusation applied to end-of-life counseling). Since those allegations typically pit average patients against putative penny-pinchers, we in journalism — with some notable exceptions — may not quite do as good a job providing balanced coverage as we would like to think.

Medicare, learning those lessons, has not only made ACOs participation voluntary for doctors and hospitals, it’s also said that the ACOs have to be controlled by a provider group. In addition, Medicare beneficiaries who are part of an ACO are free to seek care outside the ACO “network” without financial penalty.

But here’s where you have to start looking at the fine print. For belling the cat to succeed, it needs not only someone brave enough to try it, but also other basic elements. For the mice, that means a bell loud enough to be heard and attached securely enough not to fall off. For those advocating for ACOs, that means being able to send price and quality signals loud enough to be heard and that won’t be suddenly cut off.

Certainly, the Afforable Care Act being overturned would hurt. However, regardless of the fate of the ACA, virtually every major insurer is experimenting with ACOs. Leavitt Partners identified 164 ACOs, mostly in the private sector, in a late 2011 report. Their count included 99 that are primarily sponsored by hospital systems, 38 by physician groups and 27 by insurers.

Still, the Medicare ACOs, representing the largest payer for the sickest Americans, have by far the greatest potential to bring about change. But will the signals they send be loud enough to change the marketplace?

In the local news stories I’ve seen, the differences in financial risk among Medicare ACOs have not been addressed; put bluntly, they’re not in the press release. But there are differences. The Advance Payment Model provides various upfront payments to help providers in rural or underserved areas form and operate an ACO in the first place. At the other end of the spectrum, Pioneer ACOs are most advanced, being comfortable with managing care quality and cost and willing to take on the greatest risk for the greatest reward. In the middle are the ACOs of the Shared Savings Program, with no subsidies, but only mild financial risk from the ACO operations.

If you’re covering Texas, that Advance Payment Model ACO in Donna has a different financial basis than the Pioneer North Texas ACO in the Fort Worth area or the Accountable Care Coalition of Texas, based in Houston.

Moreover, there are organizational differences. Physician group-controlled ACOs can contract with a hospital and don’t have to include one hospital as an owner. Talk about a power shift. Indeed, despite warnings that ACOs would take away power from doctors, most are controlled by doctors, as amednews.com, an American Medical Association-owned newspaper, approvingly reported. Unlike past efforts to control health care costs, physicians appear to be leading the way.

That’s important, because the “who” and “where” of ACO identity and location and the “what” of financial details should lead to the “how” of examining the actions ACOs will take to change the way their physicians practice and partner with patients to ensure ACO satisfaction. (Medicare measures that, too.) If you’re trying to persuade doctors who’ve practiced their whole career as autonomous, fee-for-service providers to play as a team with other physicians and non-physicians, inside and outside the hospital, are today’s financial incentives adequate? Do you have the information systems in place to ensure better quality at lower cost? Do you have the cultural change mechanisms in place?

Who plays what role? Who gets what money? Who has what power?

“Belling the cat” of high medical costs with ACO-type value purchasing is a solution everyone can agree on, but can it really be accomplished? Some respected experts doubt it.

One final aspect of Medicare ACOs that intrigues me is that the main program is not a demonstration. Medicare can take the lessons of its Advance Payment and Pioneer demonstrations and use them to build a Shared Savings Program full of incentives to move all doctors and hospitals away from traditional Medicare fee-for-service. The ACA gives them that authority.

In other words, if Medicare can bell one cat, it may be able to bell all of them. And the odds are that even the more timid insurers in the private sector and state Medicaid programs will scamper along afterwards.

A Little Bit of History

With Medicare in crisis, the Social Security Amendments of 1983 passed with bipartisan support under President Ronald Reagan. It replaced the old “cost-plus” systems of paying hospitals under Medicare with a prospective payment system. Average payments were set in advance for each diagnosis-related group (DRG), with some adjustment for geographical and other factors. Although the new system was supposed to be phased in over several years beginning Oct. 1, 1983, and the payments were averages, some providers panicked. This gave rise to horror stories of patients being discharged “quicker and sicker.” But there was no quick way to rescind the change, and the obvious abuses of “cost-plus” billing (Defense Department toilet seats, anyone?) and the transient nature of the horror stories meant that prospective system stayed in place. Still, hospitals were able to move more and more care to the outpatient arena. That’s one reason ACOs “bundle” payment for inpatient and outpatient services.

Resources

In addition to the CMS resources linked to above, a relatively objective overview of the developments that formed ACOs can be found on this Health Reform Watch website. Another resource, funded by those in favor of the concept, is the Accountable Care Facts site.

Michael Millenson is a nationally recognized expert on patient empowerment, e-health and quality improvement. He holds an adjunct appointment as the Mervin Shalowitz, M.D. Visiting Scholar at Northwestern University’s Kellogg School of Management. He spent 13 years as the health reporter for the Chicago Tribune, where he was nominated for three Pulitzer Prizes.