There are two ways to win without cheating.

First, be better than the other guy.

Second, set the rules to your advantage.

Growing up, I loved sports, but let’s say I wasn’t very talented.

We can say that because it was true.  As my high school basketball coach said of me, ‘Well, he’s short, but he’s slow.’

When we were making up games in the backyard, I exceled because I was quick to be the one to make up the rules of the game.

Want to race?  Ok, we run down to the phone pole, but you must calculate the average of the digits in your Social Security number before you run back.

I could do a little math in my head.  My buddies were quicker than me, but only in one sense of the word.

Similarly, the Medicare Shared Savings Program (MSSP) might be better at attracting kids (ACOs) well-suited to playing the game than driving actual cost savings.

In short, ACOs get bonus payments from CMS if their actual costs are lower than their benchmark.  Ostensibly, which is an appropriately complex word for a very complex process, the benchmark is what CMS would have paid had the provider, based on their history, had the Medicare members been in traditional fee-for-service Medicare.

A few years ago, CMS decided to modify how it set an ACO’s target benchmark.  In addition to the ACO’s own historical spending, CMS also threw the spending of other regional providers into the mix.  There was some initially appealing logic to the ‘regionalization’ tweak, but as is often the case with big, blunt government programs, the unintended consequences are not minor.

It turns out that a lot of early adopter ACOs did not renew once the regional adjustment was added.

Why?

Well, their costs were higher than the region, which meant their benchmark was lowered, which meant they likely would not get a bonus and in fact now faced downside risk.

So, they opted out.

Guess what happened on the other side?

Already low-cost providers, who historically would have been competing with themselves when the benchmark was set by just their own past performance, now got a higher benchmark – it was raised by the other higher cost regional players.

‘Hey, we can beat that,’ they said.  In fact, what they said was, ‘We are already beating it, so we don’t have to do diddly and we’ll get to pocket the bonus.’

Higher-cost players exit the MSSP and stop trying to lower costs; lower cost players enter and take advantage of the higher benchmark and pocket the extra cash; CMS declares victory by showing the ‘participating ACOs’ having lower costs this year than in previous years; and the program marches on.

Adding math at the phone pole did not make me any faster, but it allowed me to pretend I was.

Maybe that is all that really matters to our reformers – not that we, you know, actually lower healthcare costs, but we feel really good about ourselves for trying hard.

Years ago, our family was watching the Olympics.  Though not a one of us can do a cartwheel without having a team of medics standing at the ready, we were outraged at the low score the judges gave a gymnast that we thought had nailed her routine.  My son uttered, ‘I could never play a sport that is judged.  Give me the clarity of a scoreboard.’

But what if even the scoreboard is subject to interpretation?  Many are these days.

We continue to explore how well we are doing – or not – bending the healthcare cost curve over the past 10-15 years. It is time to look hard at one of the centerpieces of reform – the Accountable Care Organization (ACO).

Warning…like assigning points to a double back flip on the balance beam, it depends on how you look at it.

For the government side of reform, ACOs are the funding and delivery vehicles for the Medicare Shared Savings Plan (MSSP).  2020 – yes, the year that will forever come with an asterisk – was the eighth performance year for MSSP and the scorecard from the Centers for Medicare and Medicaid Services (CMS…acronyms are breeding like rabbits today) says the 513 ACOs saved CMS $1.86 billion, net after the incentive payments were made back to the ACOs.

CMS called it a win.

‘Accountable Care Organizations are an Affordable Care Act success story. The 2020 Shared Savings Program results continue to demonstrate the impact ACOs have in improving quality and lowering health care costs,’ said CMS Administrator Chiquita Brooks-LaSure.

Even in Washington, where we now let ‘trillion’ roll off our lips as easy as a mom in the drive thru can say ‘double, nonfat, oat milk, extra steam vanilla latte,’ a couple billion dollars is real money.

But first, let’s put these big numbers in context.  The Medicare spend for 2020 was about $830 billion, so we’re talking about a ‘savings’ (more on that to come) of about 0.22%.

Said another way, currently we spend about $13,000 per year per Medicare beneficiary.  There were about 10.6 million Medicare folks (of the 64 million total) covered by an ACO, so the ‘savings’ (have to use the quotes until we get around to unpacking just how that number is calculated) comes to about $190 per person.

We have a saying in our house that dates back to the days of homework – ‘Barely counts, almost doesn’t’ – as in, ‘Are you done with your homework yet?’

So, a barely win is a win.

Fair enough.  Thanks for not spending $2 billion more of the taxpayer dollars.

But, but, but…

We must ask two questions.

Given the vast amount of energy that goes into ACOs and MSSPs, is that a really good return on the investment?

And does that reflect real savings or various statistical oddities and accounting trickeration?

Sorry son, but this is more about subjective judging than a clear scoreboard.

We’ll explore deeper next time.

One of my professional mentors told me that if I was going to be any good at sales, I needed to be able to sell big deals on a single, simple picture.  His were on cocktail napkins, a la the famous Southwest Airlines kind of picture.  He was very good.

That set me on my near clinical obsession with charts and graphs.  There is a story in the data and the data want to tell that story.  One good picture can change how we think about something.

Mark Perry at the American Enterprise Institute has one such game chart, one that he updates regularly as the data change.  Multiple commentators have called it the ‘Chart of the Century.’

Now even the accountants, who find it a slight abomination when their little rows and columns are converted to a trend line, are even a bit intrigued.

Perry’s graph  is getting even more traction these days because it shows price changes of selected US good and services since 2000.  With all the inflation news, the site is currently getting more hits than Shohei Ohtani.

The chart simply plots over time data for 15 items used by the Bureau of Labor Statistics (BLS) in the calculation of the Consumer Price Index (CPI), that now ubiquitous inflation number that is still a puzzling new idea to anyone under 40.

The overall price change – aggregate of all items the BLS tracks – has gone up 65.5% since 2000.  Since recent months have spiked a lot of things, I went back to a version of the chart I found from the summer of 2018 and that number was 57.4%.  Let’s use that to be fair.

But I want to examine at just one line on the chart.  It is easy to find.  Right that at the very top.  It shows the price changes for Hospital Services.  Before you look, you wanna guess that number, given 57-65% is the overall rate of price increases?

How about 211-216%.

Perry notes that, as a general rule, the items that are above the average are subject to more government intervention and those below average have more market competition.  That Hospital Services wins the title, and is now pulling away from second place College Tuition and Fees, seems to validate that observation.

Another question to ponder…how can overall healthcare spending as a percentage of GDP stay relatively flat while the largest sector of the industry (hospitals are about 31% of total) is going up 4x faster than general inflation?

3^rd grade math and a little logic says everything else in the healthcare spend bucket has come down.

Here is our big point on the reform status report: The changes – value-based care, MSSP, ACOs, expansion of Medicaid enrollment – were all very ‘pro’ hospital/health system because all this integrated care was how we were going to bend the cost curve.

So, how do you explain being at the top of Mark’s Chart of the Century?