Head of Medicare and Medicaid Describes Newly Proposed Plan to Lower Costs and Improve Care

April 5, 2011

Donald M. Berwick, the Director of Centers for Medicare and Medicaid Services (CMS) of the Health and Human Services Department as of March 2010, has written a perspective on the accountable care organizations (ACOs) of the Medicare Shares Savings Program.

Donald M. Berwick, the Director of Centers for Medicare and Medicaid Services (CMS) of the Health and Human Services Department as of March 2010, has written a perspective on the accountable care organizations (ACOs) of the Medicare Shares Savings Program (DOI: 10.1056/NEJMp1103602). Dr. Berwick was appointed as the head of Medicare and Medicaid by President Obama in July and has all the powers of a permanent administrator but is a temporary appointee, serving until the end of this year. 

Dr. Berwick starts his perspective with a basic criticism of the U.S. healthcare system. However, unlike many current opinion pieces written about our healthcare, this one lays out a plan that is in the beginning stages of being implemented.

The criticism is the “fragmented nature of the [U.S. healthcare system’s] payment and delivery systems.” The proposed path to the fix is a way to allow change in patient care to 1) provide better care for individuals, 2) better overall health for populations, and 3) to deter the growing cost of medicine in the U.S. by improving the quality of care.

The main problem-of both the quality and cost of patient care in this country, according to the Director of CMS, is that our system of patient care is disjointed-there is no one body that takes full responsibility for the health of a patient within the system of clinicians, hospitals, public and private payers, and employers. Instead, a patient’s treatment is distributed across various physicians and hospitals without any solid integration. This fragmentation leads to waste, duplications, and, inevitably, to unnecessarily high healthcare costs. 

The Proposed CMS Solution to Escalating Healthcare Costs and Quality of Patient Care Issues 
One potential solution to our systemic and endemic healthcare woes is the newly established Medicare Shared Savings Program for ACOs, or Accountable Care Organizations. The implementation of ACOs was one of the first initiatives of the Affordable Care Act (ACA), which is part of the healthcare reform of 2010 signed into law by President Obama on March 23, 2010. The overall stated goal of the program is to promote change that will lead to the three points listed above.

These ACOs will be responsible for the care of a defined population of Medicare beneficiaries, based on patients’ primary care patterns. The goal of each ACO is to deliver high-quality care and cost-reduction below a threshold level. The incentive for this achievement is the sharing of the Medicare savings. Proposed savings will come through utilization of one of two proposed financial models, although alternative, innovative models are also being explored.

First Steps
A major step in the implementation of the program occurred on March 31st when the Department of Health and Human Services issued proposed rules that will define how physicians, hospitals, and other key parties can adopt the new ACO form. The rules were drafted after considerable evaluation of comments on the proposed rules from those within the healthcare system. The final rules will be issued later this year.

Dr. Berwick outlines the new proposed ACO measures that emphasize quality of care, patient health, and top-quality information management. This combination aims to provide an ACO with a solid foundation to provide optimal patient health. 

ACOs Defined
An ACO can be formed by an institution or healthcare provider and led by physicians, networks of individual practices, hospitals employing physicians, or partnerships among these groups and other health care providers. Each ACO will have input from the Medicare patients and the community it serves. Dr. Berwick acknowledges that establishing ACOs may not be a straightforward process because of the complexity of the U.S. healthcare system. Each ACO will have independence and flexibility in forming their structure and will include Medicare beneficiaries as important entities. 

Acknowledging the rocky road ahead
Dr. Berwick is a pediatrician, professor at the Harvard Medical School and the Harvard School of Public Health and co-founder of the Institute for Healthcare Improvement (IHI), a nonprofit organization in Cambridge, Mass. IHI advises medical institutions on how to adopt the “best practices and effective innovations” to provide better patient care and reduce medical errors. As someone who has dedicated his career to improving patient care and outcomes, his missions appears to be in line with the central goal of the CMS. As someone fully entrenched in all aspects of patient care, he also has no illusions about the difficulty of rescuing the healthcare system.

Dr. Berwick believes that the new proposed ACO rules draw from the lessons of previous efforts, including the Medicare Physician Group Practice (PGP) Demonstration, to achieve higher quality and savings. The program is expected to evolve and is expected to need refinement and public input.  ACOs are expected to be integrated with other reform efforts, including medical home usage, bundled payments, and information technology adoptions, to name a few. This may prove to be the “critical success factor for ACOs” according to Dr. Berwick. 

Dr. Berwick, speaking on behalf of the CMS, states that “the era of fragmented care delivery should draw to a close.” ACOs should be an important tool to allow Medicare beneficiaries affordable and high quality care. The key to making the program work is likely to be the full engagement and cooperation of critical stakeholders.