Stanley Feld M.D.,FACP,MACE

In an ideal world ACOs should work. There is no evidence that  untested and complex organizational structure of ACOs developed by Dr. Don Berwick (head of CMS) will improve quality of care and reduce costs

ACOs are supposed to provide financial incentives to health care organizations to reduce costs and improve quality. There are too many defects in the ACOs infrastructure to improve the financial and medical outcomes.

At a conceptual level, the incentive for ACOs would be to increase efficiency and avoid overuse and duplication of services, resources, and facilities. In this model, ACO members would share the savings resulting from the increased coordination of care.

I have said over and over again that excessive administrative fees and ineffective management of chronic disease is the main source of waste in the healthcare system. ACOs do not deal with these main drivers of costs.

The only stakeholders who can demand that this waste be eliminated are consumers/patients. Patients must control their healthcare dollars.  They will make sure there are competitive prices and will not permit duplication of services.

ACOs are not a market-based system. They do not put patients at the center of their medical care or permit them to choose their medical care. The government controls the healthcare dollars and is at the center of patients’ medical care decisions directly and indirectly.

In order to truly repair the healthcare system a system of incentives for patients and physicians must be created. There is no question that the processes of care for chronic diseases must be improved. More importantly, the medical and financial outcomes must be measured and not the process changes.

“In theory, ACOs provide financial incentives to health care organizations to reduce costs and improve quality. In reality, given the complexity of the existing system, ACOs will not only fail; they will most likely exacerbate the very problems they set out to fix.”  

ACOs are merely the latest in a long history of unsuccessful health policy innovations. Since the 1970s, Congress and successive administrations have tried a number of tactics to control rising health care costs.  The tactics tried have been:  

1. Payments for diagnostic related groups of services, or DRGs.
2. Health maintenance organizations (HMOs).
3. Preferred provider organizations (PPOs). 

They all failed. Consumers reacted negatively to the care provided. Healthcare costs continued to rise. ACOs are being promoted as the new structure that will address the lack of success of the past tactics.

“Under Obamacare, the Secretary of the Department of Health and Human Services (HHS) is charged with developing a method to assign Medicare beneficiaries to ACOs.”

“ Because the statute is unclear about the resolution of many vital issues, the crucial details will be supplied and refined by federal regulators—as is the case for so many other provisions of the new health law.” 

Congress has relinquished its power to the unelected portion of the executive branch of government to construct a system that will reduce the rising costs.

ACOs create a new organizational structure to remedy problems inherent in the existing healthcare system.  The complexity of the structure of ACOs will result in the same or similar types of unintended consequences that led to earlier failures. 

There will be consolidation of providers. ACOs will result in increased costs rather than decreased costs.  It might decrease duplication of testing. The resulting savings will be small. There is no evidence that ACOs will provide improved medical and financial outcomes. I believe it is Dr. Berwick’s naïve wish that it will improve medical and financial outcomes. 

The are at least 7 key deficiencies with ACOs

1. ACOs do not empower consumers to be responsible for their own medical care.  Healthcare should be consumer driven with consumers controlling their healthcare dollars. They will then make informed choices about their care and insurance coverage.

      2.ACOs create artificial incentives to improve quality and provider performance. Consumer driven           healthcare creates real incentives to promote price completion. Competitors are constantly           working to improve their products, attract consumers, and ultimately increase market share.  

Consumers have no part in driving that competition in an ACO system.

           3.Most physicians are reluctant to assume accountability for patient outcomes.  Physicians                           recognize that much of the outcome is directly under the consumer/patient behavioral control.

            4. ACOs remove the patient/consumer from being responsible or accountable for their medical                   care. ACOs undermine any attempt to create a truly accountable healthcare system that can                   drive down costs.

            5.ACO do not encourage provider accountability even though it seems that provider buy-in would            be integral to an ACO’s success with its shared savings incentive.  Many physicians believe the                  share savings incentive is bogus. 

            Providers continue to be paid for each service they perform until the government provided funds             run out. There are also grave uncertainties and practical complications of distributing production             and savings between the hospital system and physicians.

             6. ACOs create an unfair competitive advantage for large organizations that are hospital                 centric. Eligibility requirements are vague and ambiguous. The eligibility requirements                 suggest that larger organizations have an unspoken eligibility advantage.

                This is the reason hospital systems are trying to form ACOs. Hospital systems think they will                 make money. I think they will fail. Hospital systems will lose a lot of money. They will fight                 with their physicians over the distribution of government reimbursement. The cost of hospital                 care will then increase. The consumer will lose.

                7. Groups of independent practitioners as well as other types of small and mid-sized practices                     may lack the infrastructure, Internet technology, or other resources needed to qualify for                     ACO eligibility. They will be forced to join hospital systems. Hospital systems have a                     history of taking advantage of physicians and their skills and intellectual property. More                     tensions will be created. Hospital systems’ ACOs will crumble. The cost of medical care                     will continue to increase further.

I have presented some common sense observations. Common sense does not seem to prevail in the difficult world of repairing the healthcare system.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

Stanley Feld M.D.,FACP,MACE

I received the following note from Dale Fuller M.D. a retired Radiation Oncologist. Like me Dr. Fuller does not have a billfold agenda for Repairing The Healthcare System. I will add my comments to his extensive critique of Accountable Care Organizations (ACO).

“I read your piece this morning, and a number of thoughts come to mind; One is a quote from Richard Nixon, who when he was "vamping for time", would say.”Let me say this about that!"  In this case the "that" is the issue of ACO’s. It stimulated some general ideas about how medicine is structured, and how care is or could be paid for.”

Dr. Fuller has expressed some of the same concerns that I have about ACO. He nailed it with his concern for the hospital systems taking advantage of physicians’ intellectual property.

It concerns me that the lead in the formation of ACO’s is generally a hospital, and most often, a large one, with multiple sites of service.  My fifty years in medicine have caused me to recognize that the management of hospital organizations and the leadership of doctor groups of any size, small or large, do not have interests that are congruent.

When hospital systems realize its vested interests must be aligned with physicians’ vested interests systems such as ACO might be effective.

I have no reason to believe that the administrators of hospitals understand the business side of medicine very well. Hospital administrator may be able to learn the business of medicine over time. The doctors would be well advised to "watch their hats and coats" while the learning is taking place.

Moreover hospital administrators tend to come and go, sometimes with great frequency, and each change brings new managers with new management strategies. Doctors, changing as they do with much less frequency, will have to learn to adapt to constantly to new management strategies.

Hospital administrations usually change because the hospital is not making enough money. Hospital systems might not make enough money when administrators treat staff physicians poorly. Physicians can undermine hospital systems’ built in profit leverage. Physicians’ may have also negotiated too good a deal.

Some of those changes will in one way or other impact physicians’ earnings. That is to say nothing about recognizing the difference in the earning expectations and compensation strategies among the various specialties likely to be swept up together in an ACO.

The division of the "pie" of dollars will be a daunting exercise, just as it is now, but with the added complexity of hospital administrators adding their own expectations to the process, and claiming their own piece of the pie.

The transition will mark the end of the era of the practice of medicine as a "cottage industry" as it is transformed into an assembly line approach to the delivery of  the care of patients.

You can bet the process of dividing reimbursement will be contested. It is difficult enough when deciding compensation among physicians in multi specialty groups.

“In your piece you mention that the dollars paid to the ACO will still be procedures based, and I believe that same process, probably with RVU’s, could easily be translated into an algorithm to facilitate the division of the revenue to those delivering the services, with, of course, that healthy slice off the top, for the administration of the ACO, provided by you-know-who.(hospital administrators).

Physicians are beginning to understand that the healthcare insurance industry loads its overhead. As physicians enter into partnerships with hospital systems they are starting to realize that the hospital systems administrators overload physicians overhead. Hospital systems pay all the overhead for employees, rents and equipment maintenance many times at an inflated fee.

Physicians are not stupid. They are starting to wake up.

“I have the sense that not only of the adage "he who has the gold makes the rules “will apply, but in addition, "he who has the data controls the flow of payments".  And, more often than not, the data is controlled by the insurance companies and by the CMS (aka the government)”

  Generally the doctors are pretty clueless about the existence and the potential usefulness of the data, prevented as they have been from negotiation with the payers with both sides having equal access to that information.

I have been told by healthcare insurance executives that physicians will remain clueless. I replied that physicians are a sleeping tiger. When they awake the party for secondary stakeholders will be over.

Physicians are reluctant to purchase and install expensive electronic medical records. Data such as claims data have been used against them. Claims data are inaccurate. Physicians are starting to learn how to collect data to be used for their advantage.

“The data is all there and could readily be used to develop case rates for individual diagnoses, or, given the characteristics of a given patient population, a capitation rate could be set quite easily based on the experience and the risk factors inherent in the makeup of the population.”

Useful data presupposes a large data base. Most of the physicians are solo or in small groups. It had been impossible to calculate capitation rates with data available in the past.

A large margin of error must be built into the cost of care. Patients are becoming sicker because of the obesity epidemic and poor lifestyle choices. Patients over utilize the healthcare system because they have first dollar coverage.

“ Once the ACO is paid, the division of the income could be made in a variety of ways, the easiest being by the Relative Value Units (RVU’s) for the services provided to the patient by the physicians.  The physicians in the ACO over time should be able to monitor the actual RVU’s reported by individual physicians.”

From the physician side if the RVU’s were fair and primary care was valued appropriately. ACO might work. ACO would not control patient utilization of the healthcare system. Patients must be motivated and incentivized to control utilization.

“When "outliers" are identified, those physicians can be re-educated about the wisdom of practicing medicine with some greater level of restraint where the provision of services is concerned.  Some of the larger organizations are already using such an approach with the evolution of clinical pathways.”

Data could be used and should be used constructively to control outliers. Groups of physicians must control the data and discipline to outliers. A peer group must have incentive to control “outliers”. It must be done in a non punitive way.

“It isn’t all that easy.”

ACO will no
t decrease costs.

“An ACO will change forever the business side of medical practice, but that may be the way the ball will be made to bounce”.

An ACO might wake up physicians and patients. It might stimulate secondary stakeholders not to take advantage of primary stakeholders (physicians and patients). I believe the chances are slim.

All in all, it is a good time for the docs to be very careful, and not to rush into something they may later have cause to regret.    DEF

The idea of ACO is a good one if it could be priced fairly. The patient incentive component is missing. Consumers of healthcare with first dollar coverage drive increasing utilization and costs.

Prevention of the onset of disease and the complications of chronic disease will drive the cost down. This can only be accomplished by consumer driven healthcare utilizing the ideal medical savings account.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.