By Gary E. Bacher, Michael E. Chernew, Daniel P. Kessler and Stephen M. Wiener
Health Affairs, August 2013
A recent drive for payment reform in both the public and private sectors is creating powerful incentives for integration in health care finance and delivery. One of the best-publicized models for encouraging a movement away from the fee-for-service payment arrangements that dominate the nation’s current health care delivery system is the accountable care organization (ACO).
Regulating accountable care organizations poses unique challenges. In particular, regulation should strive to create a level playing field both among the various providers and organizations seeking to form an ACO and between ACOs and health plans. This level playing field is known as regulatory neutrality. Regulatory neutrality refers to the concept that similar products or models for financing or delivering care should be regulated in similar ways to try to prevent regulation from favoring any particular approach or product.
Our analysis recognizes that policy interventions that might be viewed as “nonneutral” in the short term may be necessary to promote policy goals, such as maintaining a competitive marketplace, that facilitate regulatory neutrality over the longer term.
Policy Issues
Accountable care organizations are affected by a number of different regulatory regimes—including antitrust, solvency regulation, Medicare’s Shared Savings Program governance regulations, and Medicare payment rules. An uncoordinated approach to policy among these regimes creates a heightened risk that ACOs will be inadvertently favored or disfavored relative to other entities that accept financial responsibility and arrange for the delivery of care, such as Medicare Advantage plans (private managed care plans operated under the auspices of Medicare).
For example, seemingly small, technical differences—such as reserve requirements—for ACOs versus Medicare Advantage plans can place ACOs at an advantage (or disadvantage) relative to organizations participating in the Medicare Advantage program. Even if each regulatory regime were functioning perfectly in terms of its own objectives, the interaction among regimes can have unintended consequences that affect the neutrality of the system as a whole.
Although it has received little attention from health policy researchers, the concept of regulatory neutrality has been studied extensively in other contexts. This literature offers three key lessons also applicable in the health care setting.
First, in general, neutrality favors less over more prescriptive regulation. Simply put, more-prescriptive regimes affect a greater number of decisions, and thus they entail a greater risk of inadvertently favoring one organizational form over another.
Second, neutrality favors “functional” over traditional “institutional” regulation. That is, when different types of institutions are serving the same function, they should be supervised by the same regulator according to the same set of rules, regardless of the labels that may have been applied to them in the past.
Third, the first two rules are not absolute. As we show in our discussion of antitrust policy, the pursuit of neutrality can support a more activist approach and special rules directed at the health care sector, even if that might be viewed as nonneutral in the short term.
Medicare Payment Rules:
Accountable care organizations operating under the Medicare Shared Savings Program compete with Medicare Advantage plans for both beneficiaries and providers. A beneficiary enrolled in Medicare Advantage cannot be enrolled in an accountable care organization, and vice versa. Providers participating in an accountable care organization are also potential members of provider networks for Medicare Advantage plans.
As a result, neutrality between Medicare Advantage and accountable care organizations is important. Although the Medicare Shared Savings Program regulations attempt to address this point, they also show how even small, technical differences can have an effect on the attractiveness of the different models to beneficiaries and providers.
The effect of these differences could be to favor one model over another in different parts of the country and, in so doing, encourage unwanted behavior among providers and Medicare Advantage sponsors that is aimed at handicapping one of the models in comparison to the other.
Conclusion
Regulating accountable care organizations poses unique challenges. Because of their nature, they are affected by at least four different regulatory regimes. The complexity inherent in this situation requires that policy makers pay special attention to coordination to avoid unintended consequences. To address this concern, the government should seek to maintain a level playing field (what we call regulatory neutrality), so that different models of care and those seeking to offer them are permitted to stand or fall on the cost and quality of care each provides. We conclude that neutrality generally favors less, rather than more, prescriptive regulation. Nonetheless there are exceptions to this rule, with antitrust policy as the most prominent example.
More broadly, the pursuit of neutrality may need to be tempered by a recognition of competing goals. Like so many areas in health care policy, accountable care organizations present both potential opportunities and new challenges. Considerations of regulatory neutrality can add depth and clarity to considerations of how to strike the balance in determining how to regulate these new entities.
(Gary E. Bacher is the director of the Institute for Health Systems Solutions at the AHIP Foundation, in Washington, D.C. Michael E. Chernew is a professor of health care policy in the Department of Health Care Policy at Harvard Medical School. Stephen M. Weiner is the national chair of the health care practice at the law firm Mintz Levin Cohn Ferris Glovksy and Popeo. Daniel P. Kessler is a professor in the business and law schools and a senior fellow at the Hoover Institution at Stanford University. Daniel Kessler acknowledges and thanks the Institute for Health Systems Solutions at the AHIP Foundation for support in conjunction with this article.)
http://content.healthaffairs.org/content/32/8/1426.abstract
AHIP Foundation Launches Health Systems Change
AHIP Foundation
Institute for Health Systems Solutions, June 11, 2013
The AHIP Foundation (“Foundation”), a 501(c)(3) organization, today announced the launch of the Institute for Health Systems Solutions (IHSS), which has been established to create a hub for new research, new analysis, and a new opportunity for the exchange of views around changes in the organization and structure of the health care system.
IHSS builds on the Foundation’s focus on exploring ways to better contribute to the health care research and policy enterprise and to advance forward-looking ideas for improving the quality and availability of care.
“Collaboration among stakeholders involved in the health care sector is critical to the country’s ability to address the complex challenges in front of us,” said AHIP Foundation President Karen Ignagni. “That’s why IHSS is launching new partnerships, engaging researchers, and hosting forums to bring together individuals with different points of view to expand the dialogue and educate the public.”
“By working together, we will be better able to recognize the connection points between access, innovation, and smart regulation, and begin to find structural solutions to improve quality and access and reduce costs while addressin
g the substantial challenges facing our health care system,” said IHSS Director Gary Bacher.
http://www.healthsystemssolutions.org/content/ahip-foundation-launches-health-systems-change-initiative
Comment:
By Don McCanne, M.D.
This one is pretty ugly.
The new issue of Health Affairs released this week includes an article on “regulatory neutrality” as a means of “establishing a level playing field for accountable care organizations” (ACOs). What? What level playing field, and what is this about making regulations neutral?
Reading quickly through the article, something didn’t smell right. Studying the article in more detail caused me to come to the conclusion that there was only one reason for the article. It was to introduce the concept of regulatory neutrality as a way of ensuring that private Medicare Advantage plans did not lose footing to the new ACOs established by Obamacare.
The authors conclude that regulatory neutrality “favors less, rather than more, prescriptive regulation,” except “the pursuit of neutrality can support a more activist approach and special rules directed at the health care sector, even if that might be viewed as nonneutral.” That’s it! Medicare Advantage plans should be able to compete with ACOs in relatively unregulated markets, except when they need the government to provide them with “special nonneutral rules.”
Who is behind this? The lead author, Gary Bacher, is director of the Institute for Health Systems Solutions (IHSS) at the AHIP Foundation, and co-author, Stanford Professor Daniel Kessler, “acknowledges and thanks the Institute for Health Systems Solutions at the AHIP Foundation for support in conjunction with this article.”
So what is IHSS? It is a new “research and analysis” entity established by AHIP Foundation, a 501(c)(3) organization, headed by Karen Ignagni… yes, the same Karen Ignagni who heads the insurance lobby organization AHIP – perhaps the most influential lobby organization in the nation. Obamacare was created under the guidance of AHIP.
Health Affairs is one of the most prestigious health policy journals in the world. What is their role in this? It was only June 11 that AHIP Foundation announced the launch of IHSS, and yet less than two months later – much shorter than the usual lead time for a journal article – Health Affairs has published this article that informs politicians and the policy community that we have a new double standard for regulating private Medicare Advantage plans and their ACO competitors – “regulatory neutrality.”
It is shameful that leaders in our public and private institutions should be conspiring in this blatant abuse of the processes through which legitimate policy science is advanced. I mean, IHSS/AHIP actually purchased Daniel Kessler’s opinion! But Health Affairs? As I said, this one is pretty ugly.