Sunday, November 21, 2010

Transparency and "dial tone" to fight market power

Back in August, I raised the question of whether the move to Accountable Care Organizations and capitated payments would lead to market dominance and a resulting reduction in competition in certain geographic areas. The summary of the argument was this:

On the one hand, ACOs offer the potential for a better integration of care across the spectrum of primary care, hospitalization, skilled nursing, rehabilitation, and hospice. If the ACO faces an annual budget per patient under a capitated payment scheme, there is an incentive to avoid unnecessary tests and procedures and also to help direct patients to the most cost-effective component of the health care continuum.

On the other hand, if an ACO becomes the dominant provider in a region and especially if it has a electronic health record that is not interoperable with others in the region, that ACO will have substantial market power and will negotiate a higher global payment than would occur in a more competitive marketplace.

Robert Pear raises similar questions in an article in the New York Times. Here are some excerpts:

[E]ight months into the new law there is a growing frenzy of mergers involving hospitals, clinics and doctor groups eager to share costs and savings, and cash in on the incentives. They, in turn, have deployed a small army of lawyers and lobbyists trying to persuade the Obama administration to relax or waive a body of older laws intended to thwart health care monopolies. . . .

. . . Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve — by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses.

A related concern was raised by Attorney General Martha Coakley in a speech last week to the MA Association of Health Plans, as reported by Matt Murphy of the State House News Service:

Attorney General Martha Coakley cautioned Friday against a "full-scale push forward" on global payment reform to address spiraling health care costs without addressing the underlying issue of market clout that has led to a disparity in pricing among providers without any clear link to quality of care.

. . . [S]he has directed her staff to resume its effort of examining the health care market in Massachusetts to study models of care delivery and the associated costs.

. . ."A shift to global payments by itself is not the panacea to controlling costs," Coakley said. "Implementing payment reform without addressing the market leverage issue outlined in our report is like trying to fix the roof on a house without fixing the flawed foundation."

Because anti-trust regulatory action is often ineffective against market dominance, we should focus on self-reinforcing policy initiatives to mitigate against this possibility. Here are two suggestions.

The first is one mentioned often on these pages: Total transparency of rates paid by each insurance company to each provider. In Masachusetts, a good first step along these lines was taken by the Legislature and Governor Patrick this past summer. Only when subscribers can see the actual rates being paid will there be the moral force to ensure that rates are reasonably related to factors other than market power.

The second idea is a simple as dial tone: Complete interoperability of medical records among providers. As long as proprietary electronic medical record systems exist, a given provider network can control the degree to which patients can choose lower priced or higher quality doctors and hospitals outside of that network.

Instead, we need the equivalent of the "magic button" described in this post by our CIO, John Halamka, demonstrating interoperability between our hospital and Atrius, the state's largest multi-specialty practice:

By working with Epic and Atrius, we enabled a
"Magic Button" inside Epic that automatically matches the patient and logs into BIDMC web-based viewers, so that all Atrius clinicians have one click access to the BIDMC records of Atrius patients.

If this capability existed among and between all provider systems, consumer choice would be possible. Without it, a dominant network will remain dominant.


The Medical Quack said...

I agree it will be interesting to see how this all plays out being economic times are complicating issues. We have some hospitals in California that basically become Cadillac ER rooms once bought by Prime Healthcare, who is known for buying up financially strapped hospitals and sometimes is their only choice. Prime as I understand is just now beginning to sign contracts but resists so they can charge their customary fees. Basically everything that does not drive a profit gets cut and the money avenue of course is the ER room so they are first class operations. How ACOs will work here is kind of question I think. They are not the busy centers they used to be and you can roll bowling balls in the parking lot today, as a couple of them are in my area and I drive by all the time.

We also have 2 new non profit organizations set up to help small chain and independent hospitals with their work with ACOs. This came on the heels of the City of Hope judgment where the current physician's group was to be abandoned and all MDs are now required to join the new group created by the hospital or face no longer being on staff. The Hope situation was kind of ugly with both the hospital and physician's group filing suit against each other before the ruling came out.

This situation also set a precedence here and I guess we will see who's next up to bat with their ACOs and how physician's groups fair. During the time before the judgment was given, there were MDs worried and it could be that they will have less representation. In California we have laws which prohibit doctors from being direct employees of a hospital so they all have physician groups.

Hoag Hospital in Newport Beach, which is in a good position for funding almost any time simply due to where they are and the community donations that flow in, also lead the first ACO Congress meeting held in Century City a few weeks ago.

Anonymous said...

I agree with the general thrust of your comments, but I think the proposals qualify as "necessary but not sufficient". The very idea of a medical home, I believe, is that patients will remain with a single ACO based on the affiliation of their primary care provider - thus exercise of 'consumer choice' would be limited anyway, yes?

And, at least in Boston, it's clear that subscribers really don't care if the rates are transparent because they think their hospital deserves these rates due to (perceived) high quality of care - a view shared by at least one local hospital administrator.

Therefore we come full circle back to the payment mechanism, which is really at the heart of the problem. If one organization can negotiate higher global payments for the same care, as you suggest, then the entire idea of global payments is subverted, since they would have no incentive to become efficient.

I hate to say it, but I think the idea of competition in health care has already been shown not to work, and efforts to encourage it will only be overcome by gaming the rules. I would love for you economists to tell me why I am wrong, but I am not hopeful.

We need some drastically new ideas.

nonlocal MD

Anonymous said...

Fortuitously, Dr. Kent Bottles just addressed the issue of culture and the success of ACO's on his blog:

One can make all the rules we want, but until we all internalize the culture of caring for patients instead of making money, not much will change.


Anonymous said...

Excellent column on this subject in the Washington Post; "Health care's dilemma: Competition or Collaboration?"

Interesting idea to exclude health systems already having achieved market dominance from any temporary or permanent anti trust exemptions.