The Affordable Care Act (ACA) and the Centers for Medicare & Medicaid Innovation emphasize accountable care organizations (ACOs) as means to achieve cost savings, ensure high-quality care, and realign financial incentives. Oregon has created a program based on the ACO model, which aims to change Medicaid financing and health care delivery. Failure of the Oregon experiment could jeopardize health care for vulnerable residents and call into question the viability of central tenets of the ACA.
In 2011, the Oregon governor and state legislature created coordinated care organizations (CCOs), which enabled the state to receive a modification to its federal Medicaid waiver for the Oregon Health Plan. This allowed changes in its program design and additional financial support. Under the federal waiver, the health authority provides CCOs with stable funding to serve patients enrolled in the Oregon Health Plan for the first year of the program and requires these organizations to achieve a 2% reduction in the rate of growth in per capita Medicaid spending by the end of the program’s second year (ie, bending the cost curve). In exchange, the federal government will provide approximately $1.9 billion over 5 years to support the program, but large penalties will be imposed if the required savings are not realized.
Although many stakeholders are committed to this new program, it could fail. The state’s proposal to achieve savings and quality improvement without a decline of eligibility or benefits depends on a combination of improved administrative efficiencies and effective health care delivery reforms, which include expansion of disease-management programs; more flexible care, including expanded behavioral health services that are more integrated with physical health services; improved care coordination; and expansion of patient-centered medical homes. Many of these approaches have not necessarily reduced costs, and some of these conditions are not realistic for many Oregon CCOs.
Challenges to implementation and execution are also present because in many of the CCOs, the contracted health systems are not integrated with each other, nor are their individual units or components. The CCO lacks executive or operational oversight of member organizations, which may limit its success. Another major challenge is that CCO-contracted organizations have mixed models of reimbursement (eg, fee-for-service, capitated, diagnosis-related groups, etc) that may diminish efforts to improve efficiency. Coordinated care organization–contracted organizations may need to create different systems of care for patients with various types of insurance, an effort that could be unacceptable to many providers and patients. State policy makers could anticipate that the reforms will be incorporated into employer-based insurance. If this transition occurs quickly, a self-sustaining momentum for the Oregon ACO experiment could result. If not, enormous fiscal and operational challenges for participating organizations could overwhelm reform efforts.
The Oregon experience highlights considerations regarding formation, implementation, and performance characteristics that policy makers and payers should consider when contracting with ACOs. Does the ACO structure direct patients toward maximally efficient care and continuously identify and create improvements in delivery systems? Is the providers’ revenue generated by ACO contracts sufficient? Are the plans for meaningful improvements actionable early in the contract period and able to provide management responsibility over member organizations? Are adequate information technology systems in place? Are health care providers sufficiently engaged to support the performance goals? Will productivity metrics effectively account for population management efforts, do incentives relate to prespecified quality and value metrics, and are patients given incentives to seek high-value care? Some of these considerations have been addressed in the Oregon experiment, but others have not. This experiment will provide critical lessons for ACO-based reform.