First, I think Accountable Care Organizations (ACOs) are a great idea. Just like I thought HMOs were a good idea in 1988 and I thought IPAs were a good idea in 1994.
The whole notion of making providers accountable for balancing cost, medical necessity, appropriateness of care, and quality just has to be the answer.
But here’s the problem with ACOs: They are a tool in a big tool box of care and cost management tools but, like all of the other tools over the years like HMOs and IPAs, they won’t be used as they were intended because everybody—providers and insurers—can make more money in the existing so far limitless fee-for-service system.
I see the $2.5 trillion American health care system as a giant health care industrial complex. It just grows on itself and sucks in more and more money. Why not? The bigger it gets the more money we give it.
How do you make it efficient? You change the game. You can’t let it any longer make money just getting bigger. The new game has to be one that only pays out a profit for results—better care for a budget the country can live with. There are lots of tools available to do that. ACOs, capitated HMOs, IPAs, disease management, enormous data mines, Electronic Patient Data Systems, and so on.
But, here’s the rub. There isn’t a lot of incentive for payers and providers to do more than talk about these things and actually make these tools work. Right now they can just make lots more money off the fee-for-service system. They demand more money and employers and government and consumers are willing to just dump more money into the system. Sure they complain about it but they just keep doing it.
On the heels of the “Patients Rights Rebellion” (or maybe better titled the Provider Rights Rebellion) in the late 1990s, a CEO of one of the biggest health plans told me, “We’ve had it. We tried to manage care. Actually got results. Then consumers and employers and the politicians all sawed the limb off on us. Screw it. Back to fee-for-service. We can make more money doing that and not take all of this heat. They won’t admit it but that is what they [patients, employers, and politicians] really want.”
ACOs won’t succeed in the near term any more than capitated HMOs and IPAs accomplished anything in their day because there is no reason—no imperative—for the health care industrial complex to want them to succeed.
Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?
Oh, there will be some providers—particularly hospital administrators—who can’t wait to build an ACO but probably more because they want another excuse to corner the primary care docs as a marketing channel for their growing system. But spend millions to develop an ACO so they can get less money? Only in the policy wonk netherland does that compute.
The only people on the ball when it comes to this ACO idea are the anti-trust lawyers and with good reason.
In my next post, I will talk more about how we might change the game so that these tools can work.
4 comments:
Yes, especially if one just considers the unit game. Produce more units of health care get paid more. So the ACO concept or government concept says work hard at producing less units and we will split the difference with you. The provider group is still less financially there where they would have been if they just do business as usual. Intuitively it makes no sense.
Creative capitation arrangements are the only way to change the trend.
Mr. Laszewski: Before you declare ACO's won't work, let's look more closely at the facts:
1) Our current healthcare system has been widely criticized for being fragmented, costly,inequitable and spotty in terms of quality and delivery. Furthermore rising costs are unsustainable.
2) The current production based reimbursement system is a contributor to rising costs and has not been correlated with higher quality. It some cases it has been an incentive for unnecessary procedures.
3) ACO's come from successful trials in the 2005 Physician Group Practice Demonstration where 10 provider organizations which included standing group physician practices to integrated delivery systems participated in a "shared savings" program with continued fee-for-services fees but bonus payments for improved care and reduced costs. By year 3, most groups had met majority of quality benchmarks and 5 groups received $25 million in bonus shared savings with a total of $32 million in Medicare savings.
4) Unlike HMO's of the 1990's which costs by reducing access, ACO's will only share in upside if various quality measures are met (65 at present count). Furthermore patients are free to move to ACO's they prefer that offer the best value.
5) In addition to CMS shifting direction to trial ACO's beginning this next year, private payers are already making preparations behind the scenes. Innovation in payment alternatives is already in use in the private sector. Note the Alternative Quality Contract that Blue Cross/ Blue Shield has put in place in Massachusetts.
6) Significant funding will be essential to set-up sophisticated electronic medical data systems and help get organizations up to speed and is part of the ACA.
7) Proposed payments will include a spectrum of fee-for-service with no risk and shared savings to fee-for service with larger shared savings but with shared risk to full capitation.
8) Like many of my colleagues, this paradigm shift is a threatening change from the current payment system that we have come to know and feel some security in. Careful coordination and negotiation with CMS, and most importantly, private payers and providers to test these new alternatives will be key to it's success. Should it not be all our goal of providing higher quality care at lower cost? That is what true healthcare reform is all about.
Dr. Joe A.
Reply to Dr. Joe A.
To whom do the "shared savings" of ACOs accrue? Certainly not to the consumer, nor to the taxpayer.. As to "trial ACOs," why not act on the results of tried and true nationwide trials in countries like France, Canada, Sweden, Taiwan. Their economists went to first-class universities (often in the US) but they learned to look for cost-effective, common sense solutions to problems.
This whole mess was foretold by Dr. Relman over 30 years ago (http://pluto.fss.buffalo.edu/classes/dms/berna/dms434/readings/relman.pdf) in his "medical industrial complex" speech.
The US has the best healthcare system in the world, if provider compensation is the metric. If we compare to our industrialized counterparts using patient care as the metric... we barely crack the top 30. It is embarrassing...
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