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Obamacare is making medicine more efficient

By paying providers for outcomes as well as services, the Affordable Care Act is making medicine more efficient.
Doctor Andy Chiou operates on a patient in Peoria, Ill., Nov. 26, 2013.
Doctor Andy Chiou operates on a patient in Peoria, Ill., Nov. 26, 2013.

The score-keeping over Obamacare tends to rely on two metrics: the number of people enrolling in health plans, and the prices they’re paying for coverage.

Both are key measures of success, but we often overlook a third measure that’s just as important.

Obamacare is not just an expansion plan. It also aims to boost the value of the care we purchase as consumers, employers and taxpayers. The traditional U.S. system costs more and accomplishes less than any other in the developed world. The ultimate goal of health-care reform is to improve our return on investment—to buy more health for our money.

The government has just published some early findings on that quest, and the news is encouraging. On Thursday, even as the Kaiser Family Foundation was reporting further erosion in public support for the health care law, Medicare officials released data showing that health care providers who embraced a new reimbursement scheme saved themselves and taxpayers about $400 million in 2012.

That’s a tiny fraction of the nation’s total health care costs, but the savings came from a handful of experimental initiatives that were still ramping up. The findings suggest that as more doctors and hospitals embrace the new payment model, it could transform the whole system and save billions.

The challenge is to build a health care system that rewards providers for quality and efficiency rather than sheer volume of services.

Under the traditional fee-for-service reimbursement system, the doctors and hospitals that rack up the biggest bills earn the most money. There’s no reward for preventing costly health crises, but treating them can generate huge profits. Every provider involved in a patient’s care has an incentive to intervene, and little reason to avoid waste or duplication.

To break the cycle of rising costs and diminishing returns, the federal Center for Medicare & Medicaid Services has launched a flurry of initiatives to seed so-called accountable care organizations (ACOs), and reward them for quality rather than sheer volume. To discourage unnecessary treatment, Medicare negotiates so-called “bundled payments” for different “episodes of care,” such as a hip replacement or the treatment of a heart attack. Instead of billing Medicare for every test or procedure performed during the course of a patient’s treatment, the ACO works to achieve the best possible result within a fixed budget that covers the whole episode.

These bundled payments reflect the known costs of meeting people’s needs in particular regions and circumstances, but they’re only part of the new payment model. If an ACO can achieve good outcomes more efficiently than expected—by coordinating care, eliminating waste or preventing costly complications—the organization gets to keep a share of the savings. 

The transition isn’t easy. Medical practices built on the old reimbursement model still lack the tools, knowledge and personnel to devise patient-centered treatment plans and track the costs and benefits.

To operate efficiently, an ACO must be able to digitize and analyze patient records, and it needs physicians who can lead and participate in teams rather than working as soloists. The Affordable Care Act has helped participating medical organizations cover those investments, and the new findings show that those that make the leap can succeed.

The government's new analysis focuses mainly on 114 ACOs taking part in the Medicare Shared Savings Program, one of several related initiatives. During their first 12 months of the program, 54 of the 114 groups came in below their projected costs, and 29 of them achieved significant savings. In that program alone, the ACOs earned $126 million in shared savings, and the Medicare Trust Funds earned $128 million. A smaller group of innovators, known as Pioneer ACOs, racked up total savings of $147 million, while acing every measure of patient satisfaction.

“This is a long-term strategy,” Dr. Patrick Conway of the Centers for Medicare & Medicaid Services said during a Thursday press briefing, “but the early results hold an obvious lesson. When health care providers are accountable for quality, we get better results.”