During a session on a new Medicare program at a CalPERS board meeting on Tuesday, trustees got an education on the impact of private equity on health-care companies.
Starting on Jan. 1, the Centers for Medicare and Medicaid Services unveiled a pilot program, a revamp of a Trump-era program, that puts a private provider in charge of coordinating care for traditional Medicare patients in exchange for a share of the cost savings to Medicare.
At the board meeting slated as an educational day, the new program — the Accountable Care Organization Realizing Equity, Access, and Community Health Model, called "ACO REACH" — was criticized by a speaker and stakeholders for continuing to include private equity-backed companies as gatekeepers of patient care for traditional Medicare under the new version of the program.
Last year, a number of organizations including lawmakers, physicians and others criticized the former program for threatening patient care by including "profit-driven organizations" in patient care decisions, according to a Jan. 5, 2022, letter from over 50 lawmakers to Xavier Becerra, secretary of the U.S. Department of Health and Human Services, and Chiquita Brooks-LaSure, the administrator for the Centers for Medicare and Medicaid Services. At the time, the majority of the then-53 organizations were investor owned and controlled, including by private equity firms.
Some speakers at the board meeting of the $456.6 billion California Public Employees' Retirement System, Sacramento, said that not much has changed and that private equity-backed companies are still on the list of organizations approved to manage care of traditional Medicare patients.
Speaking before the board, Elizabeth Fowler, deputy administrator and director of the Center for Medicare and Medicaid Innovation, and Pauline Lapin, director for the Seamless Care Models Group in the Center for Medicare and Medicaid Innovation at the Centers for Medicare and Medicaid Services, said that the new model is a vast improvement. Unlike the earlier model, ACO REACH requires participating organizations to develop a health equity plan to mitigate disparities, among other mandates.
Several board members including newly elected board President Theresa Taylor asked Ms. Fowler and Ms. Lapin about private equity-backed companies serving as accountable care organizations, or ACOs. They said that all of the ACOs were held to the same strict standards, including private equity-backed companies. They said that to be successful ACOs had to both deliver high-quality care and spend less money.
An ACO is not an insurance company and patients still have the same rights they have under traditional Medicare, including the freedom to see any health-care provider that accepts Medicare, even if that provider is not part of an ACO, according to Ms. Fowler's presentation to the board.
Frank Ruffino, a designee of board member state Treasurer Fiona Ma, said his concern is that private equity firms that control an ACO would be more focused on profits over patient care.
"It's hard to a draw line of these are the good guys and these are the bad guys," Ms. Lapin said. Instead, the focus should be whether there are cost savings from benefits such as patients having fewer trips to the emergency room or better controlling their diabetes or better taking care of chronic conditions, she said.