ACO Payments May Hinge More on Geography than Quality
"That is because spending growth in one time period does not seem to be correlated at all with spending growth in another time period for a given area," McWilliams says. "For an organization deciding whether or not to participate in these ACOs, it would be unclear to them whether or not it would pay off."
McWilliams and study coauthor Zirui Song suggest instead that the federal government rely more on local growth factors to gauge spending targets. "There would be less of this problem of gains or losses for the organizations that are unrelated to their efforts to lower costs and improve quality," McWilliams says.
McWilliams says the study did not directly examine the affect of the HRRs on rural ACOs, but he identified some vulnerability.
"The variation in spending growth had two components. One was a random component that’s due to changes in healthcare needs of Medicare beneficiaries from year to year," he says. "The other is a more systematic component and the result of market forces that drive spending growth in particular areas. For example, if provider organizations are competing on the basis of attracting the latest and greatest technology to attract patients, spending growth ought to be uniform in the area."
"I would not expect the systematic component to be any more variable in rural versus urban areas," McWilliams says. "But clearly the random component would be because rural areas are more sparsely populated. A prospective ACO in a rural area would probably face a bigger gamble in terms of a one-year loss or gain that is due to the payment methodology than would an ACO in a more densely populated area."
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