No Magic Bullet for Shifting Risk in Health Care Spending, Analysis Finds

in Uncategorized
September 5th, 2012

Accountable care organizations, supported by federal health care reform, are enough of an improvement over the failed capitation arrangements of the 1990s to make them a “worthy experiment,” but they are not a cure-all for controlling health care costs, according to an analysis co-authored by a researcher from the BU Schools of Medicine and Public Health.

In the September issue of Health Affairs, Austin Frakt, a health economist who is an assistant professor of health policy and management at BUSPH and assistant professor of psychiatry at BUSM, and co-author Rick Mayes, an associate professor of political science at the University of Richmond, examine the lessons learned during the failed cost-capitation effort of the 1990s. The rise and fall of capitation payments — a fixed lump-sum per patient paid to health care providers to cover all care — offers a stark example of how difficult it is for providers to assume “meaningful financial responsibility” for patient care, Frakt and Mayes argue.

They say that while capitation offered some advantages for payers and providers, such as more control over the provision of the care, it also had limitations, such as a greater financial risk for providers who could not offer medical care for less than the lump sum, as well as incentives to “stint” on care. After an increase in popularity, the lump-sum payment system was largely abandoned, with most providers returning to the traditional fee-for-service model, meaning they are paid for whatever services they render.

Frakt and Mayes note that policy makers “have again turned their attention toward new methods to control volume, including exhibiting renewed interest in shifting cost risk to providers, as capitation did in the 1990s.” Yet, they write, “the capitated arrangements of that era proved unsustainable. Is history doomed to repeat itself?”

Not necessarily, the duo says. They see some promise in the newest attempts to shift financial risk onto providers by creating accountable care organizations (ACOs) — networks of providers responsible for the care of a defined group of patients and, in part, for the cost and quality of that care. ACOs have the goal of providing financial incentives for coordinated and judicious provision of appropriate, high-quality health care. The organizations can secure bonuses if their spending on patients falls below a designated benchmark and they meet quality targets.

Frakt and Mayes say some of the lessons of capitation appear to have informed the new ACO models, which don’t put providers at the same high degree of risk for health care costs that capitation did. If ACOs fail to meet benchmarks, the financial penalties — if any– are relatively modest. And because most ACOs have relatively large patient bases, they may be better able to spread risk.

“Accountable care organizations offer an opportunity to increase quality and reduce spending, while potentially avoiding some of the larger dangers that doomed capitation,” the analysis says. “Nevertheless, they are not without their own limitations and challenges.”

Frakt and Mayes note that some experts are skeptical that the newer models can save significant amounts of money, arguing that only full capitation or similar models will work. Yet, Frakt and Mayes say, policy makers and stakeholders “are justifiably wary of repeating the failed capitation experiment. It is not yet evident how to resolve this Catch-22. Full capitation did not succeed, but models that fall short of it might not, either.

“The United States remains in the same situation it has been in for decades: unsure of how to bend the cost curve while maintaining or improving the quality of care,” they conclude. “With accountable care organizations, the search for the’ sweet spot’ between provider and payer risk continues.”

The full article is available here:

-By Lisa Chedekel