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ACO Payments May Hinge More on Geography than Quality

John Commins, for HealthLeaders Media, May 2, 2012

The federal government is structuring the payments within these 306 hospital referral regions to address geographic variations now seen in Medicare spending growth.

"There was some discussion in those regulations about using a national growth factor to help compress the geographic variation in Medicare spending," McWilliams says. "So the idea would be in a high-spending growth area using a mean national growth rate to set the spending target would necessarily bring that spending down in the high-spending growth area and vice-versa for a low-spending area. It would bring it up."

Unfortunately, McWilliams says, HRRs can’t draw a correlation between spending growth levels—based on a single year of data or an average across years—and spending growth rates—the percentage change across more than one year.

"There are such things as low-spending level high-spending growth areas, and high-spending level low-spending growth areas. In fact they make up about half of hospital referral regions," he says. "So using a national growth factor would not seem to accomplish the stated rationale in the regulations of compressing geographic variations in spending."

Such a structure makes it difficult for healthcare organizations within specific HRRs to estimate whether the use of a national growth factor to set a spending target would benefit them or not.

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1 comments on "ACO Payments May Hinge More on Geography than Quality"


Mike Barrett (5/3/2012 at 12:32 PM)
So, why does one area expense grows faster than another? Iowa doesn't seem to be fatal for seniors yet the costs there are very low compared to other locations... why? At some point this needs to be answered - if we don't already know what the answer is. And the difficult confrontations be made and resolved. ACOs begin the process of having providers meet, face to face, and explain why their practice patterns are different (for good or bad) from the admittedly ever evolving standard or best evidence of care. That medicine must move from an "art" to a science for the vast majority of care. Medicine should, if not must, expand their vision of the "M" in E&M codes to beyond the office visit. We tell a lawyer they have a fool for client if they advocate for themselves in their specialty. Yet, we expect the patient to advocate for themselves in the far less mature world of healthcare. We can and simply must do better for patients. ACO are most likely not the endpoint, rather an important next step in the evolution of the health care system.