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Why Medicaid Accountable Care Organizations Fail and How They Can Succeed

The Patient Protection and Affordable Care Act (ACA) of 2010 implemented health care reform by increasing access to health insurance through subsidies and Medicaid. The ACA standardized health insurance benefits and supported transforming fee-for-service payment to models of value-based payment. The triple aim of improving the experience of care and the health of populations while reducing cost of care became the call to action of health care reform. Accountable care organizations (ACOs), which accept responsibility for the care, health, and cost of a population, began in many health care organizations.1 The Centers for Medicare & Medicaid Services developed measures and payment models for Medicare beneficiaries. Hospital systems and other institutions developed plans to redesign primary care, implement population-based risk stratification and management, collect quality health indicators, and monitor hospital admissions, readmissions, and emergency department visits.2 The ACA includes provisions for a pediatric ACO demonstration project, but the Centers for Medicare & Medicaid Services never directly supported the model development. Differences in state Medicaid funding, in contrast with federal funding for Medicare, discouraged the growth of pediatric ACOs.3 However, many organizations started Medicaid ACOs with the goal of using health care funding to better fit the unique needs of the maternal and pediatric populations. My experience with ACOs spanned 2 different institutions. Both groups managed a Medicaid population, received capitated funding, and included hospitalemployed and community physicians in its primary care group. One institution served only children and the other, adults and children. Both developed population-based risk stratification, utilization management, and case management teams. Community health care workers were hired to provide in-home outreach to high-risk families. Dashboards for quality metrics, Healthcare Effectiveness Data and Information Set, and inpatient and emergency department use were available. Both institutions ultimately decided to dismantle their Medicaid ACOs. Why did this happen? The challenges in implementation included reconciling a new financial model, aligning incentives with clinicians, and integrating care across the institution. Hospitals are financed through fee-for-service inpatient admissions. A bed filled is revenue; more beds filled creates more dollars for the hospital. Populationbased payment is different; the ACO convener receives a capitated payment for each member in the ACO and accepts financial risk for his or her care. Populationbased payment creates a set amount of revenue for a set amount of time. The challenge is to manage the dollars, the risk, and the health of these patients, which requires interventions that prevent hospitalization and keep patients well. Traditional revenue projections in a fee-for-service environment make sense to hospitals. Capitated revenue that must be managed by decreasing bed-days threatens hospitals. As one hospital administrator recently related, “Why would a hospital want to keep patients out of the hospital?” Accountability for the health of a population is a difficult undertaking. An ACO juxtaposes the goals of a healthier population at reduced cost of care with hospital goals of increased profit from fee for service. As long as encounter-based, fee-for-service medicine is paid better than populationbased medicine, ACOs will start and will fail. Integration of the ACO into inpatient and outpatient hospital operations posed a challenge in both institutions. In both instances, care management teams at the hospital and the primary and subspecialty practice levels were developing at the time that the ACO was developing. Case management systems developed in parallel at the clinical sites of care and the population management program of the ACO. High-risk patients had several case managers: one at the ACO level, another at the primary care practice level, and one at a subspecialty practice level. A great deal of distrust developed between the case managers at different locations; duplication of care management services was not helpful to families and led to the formation of turf wars among ACO, primary, and subspecialty care sites. In both cases, there was refusal of information sharing among care team members for the same patient, with the Health Insurance Portability and Accountability Act cited as the reason. Finally, there was no alignment of clinician incentives with improved care or reduced cost of care. In fact, physicians in one institution still received bonuses based on the generation of relative value units; the other institution had no bonus structure. Successes of both these ACOs are important to highlight. The global dollars allocated to the ACO convener funded the development of the infrastructure needed to deliver population-level care, including (1) enhanced payment to medical home for care for underserved children; (2) data analytics to capture quality, use, and cost metrics; (3) care management and social work resources at the point of care; (4) social investment fund; (5) payment for implementation of telehealth innovations: and (6) support of quality improvement at the practice level.