At President Obama's State of the Union address, Oregon Governor John Kitzhaber, a guest of Michelle Obama, might have been hoping for a mention of Oregon's ambitious Medicaid reform program, an ACO-like financing and delivery redesign that may eventually extend to Medicare members, public-sector employees and even privately-insured residents.
Obama did not mention Oregon or Kitzhaber, although in a year or two he could have reason to -- if Oregon's new Medicaid plans yield their intended 2 percent reduction in per capita Medicaid spending growth, which might also signal the potential success of ACOs.
Whether or not that will happen remains to be seen, and Eric Stecker, MD, a cardiologist at the Oregon Health & Science University, Stecker is among those observing skeptically, viewing Oregon's coordinated care organization (CCO) model as promising but hardly a sure bet.
"The Oregon experiment highlights both the bold vision of ACO-based healthcare reform and the potential challenges to executing that vision," Stecker wrote in a New England Journal of Medicine commentary. "Failure of the Oregon experiment would not only jeopardize healthcare for vulnerable Oregonians but also call into question the viability of central tenets of the ACA."
With a federal waiver, the Oregon Health Authority (OHA) is using a global payment model for CCOs -- consortiums of providers and managed care plans -- to serve Medicaid and CHIP beneficiaries, with the requirement of achieving a 2 percent reduction in the rate of growth in per capita Medicaid spending, from a 2011 baseline of 5.4 percent, by the end of the CCOs' second year.
The CCOs notably include coverage of behavioral and dental health, which is being phased in next year. Of Oregon's 600,000 Medicare and CHIP members in Oregon, 90 percent are enrolled in 15 CCOs across the state, and since the OHA oversees the state's public employee health benefits, some 275,000 teachers, cops and government workers may be also be transitioned to CCOs. "The state's ability to link these two programs through a single agency gives it the leverage to effect systemwide reform," Stecker wrote."However, as committed as many Oregon stakeholders are to this experiment, there is a distinct possibility that it will fail."
The state's quest for both savings and quality improvement depends on a combination of administrative efficiencies and delivery reforms, including the integration of behavioral and physical health and expanded disease-management programs and patient-centered medical homes. Although patient-centered medical homes have been shown to yield savings and care improvements, Stecker wrote, "the evidence comes from large, highly integrated care networks with years of experience and a history of iterative improvements," which "are not realistic for many Oregon CCOs."
Integration within CCOs may also pose challenges, he argues. In many CCOs, "there is no integration among the contracted health systems," Stecker wrote. The state's largest CCO, the Portland-based Health Share CCO, covers 40 percent of the state's Medicaid and CHIP enrollees, and is comprised of 11 member organizations, including Kaiser Permanente and the Oregon Health & Science University, Stecker's employer.
Health Share is divided into four units, with "little or no integration among them," and in the city's highly competitive hospital market, "the organizations within the Health Share units continue to engage in vigorous rivalries," Stecker wrote. "This unusual management approach, in which the CCO lacks executive or operational oversight of member organizations, coupled with potentially competing internal priorities may well limit the CCO's success."
In another hazard scenario, delivery changes needed for savings under the global capitated payment model could erode provider revenues from traditional employer-insured fee-for-service contracts, Stecker wrote. While trying to phase out Medicaid fee-for-service without affecting provider revenue from private insurers, CCO providers "may be required to develop different systems of care for patients with various types of insurance, which could prove unacceptable to many providers and patients." Alternatively, Stecker noted, CCOs "could incorporate population-management strategies into their work without regard to their effect on fee-for-service revenues."
Some Oregon lawmakers and health officials are hoping that the CCO reforms will be incorporated into Oregon's greater healthcare system, for employer-based insured residents, and also for Oregonians on Medicare -- which would also represent a unique approach from CMS. "If such a transition occurs rapidly, it could create self-sustaining momentum for the Oregon ACO experiment," Stecker wrote. "If not, insurmountable fiscal and operational challenges for participating organizations could overwhelm reform efforts."
Either way, "this experiment will hold crucial lessons for ACO-based reform," Stecker wrote. Among several questions Stecker and researchers would like to answer, after several years of the CCOs' performance, are whether the ACO/CCO structure directs and incentivizes patients towards efficient care and "continuously identifies and operationalizes delivery-system improvements."