Wednesday, November 30, 2011

Let's wake up about ACOs

Comments by two folks recently should reawaken our concern about how to hold accountable care organizations accountable and whether creation of ACOs will lead to market dominance that will not bring value to patients.

Back in 2009, I noted: 

Here in Massachusetts, there is only one such entity that approaches the definition of an ACO, Partners Healthcare System. But there is no sign that it has used its size and scale to deliver care at a lower cost. Indeed, there is evidence that it has used its market power to extract higher rates from insurance companies. Likewise, there are no data to show that quality, safety, and efficacy in the delivery of care throughout the Partners system is better than other community hospitals or academic medical centers.

Indeed, a recent post suggests that such economies may be at risk in ways I hadn't considered.

Now, see these comments from Federal Trade Commissioner J. Thomas Rosch, as reported by Avik Roy on The Health Care Blog:

“The net result” of ACOs, says Rosch, “may therefore be higher costs and lower quality health care—precisely the opposite of its goal.”

Rosch notes that the Centers for Medicare and Medicaid Services (CMS) have been running an ACO demonstration project, called the Physician Group Practice Demonstration, for several years now. “The results were nothing to crow about,” says Rosch. “Even after five years of the project, a majority of the participating practice groups did not achieve any cost savings.”

In theory, the Federal Trade Commission has the authority to challenge monopolistic hospital mergers. But in 1996, the FTC’s policies on health care mergers were amended to provide a safe harbor to competing hospitals that achieved sufficient clinical integration. “I thought then, as an antitrust practicioner who frequently represented health care providers, that the 1996 amendments…were the biggest loophole in the antitrust laws I had seen,” says Rosch. “Subsequent Advisory Opinions issued by Commission staff…were about as clear as mud.”

Now, look at the remarks from former Massachusetts Governor Michael Dukakis, who, you might remember, introduced the first universal health care law to the state several decades ago.  Whether you agree with his remedy or not, it is prudent to regard his warning carefully:

Speaking during the Harvard School of Public Health Voices from the Field series, Dukakis said urging the health care market to fix itself is “a colossal waste of time.”

“If the market doesn’t work you have to regulate,” he said. “R-E-G-U-L-A-T-E. Thoughtfully, responsibly, and with the active involvement of all of the people who provide health care and who are very important to us.”

ACOs and global payments. What did we used to call them? HMOs and capitation. We tried that, folks. It didn’t work. Why are we doing it again?

I have noted before that public policy formulation in the health care arena is characterized by a striking lack of rigor.  Here are two experts in the field who are urging us to be cautious about basing the new design of health care on a wish and a prayer.  It is interesting to ask why they are being ignored.  Can it be that those with market power in this field have seen a answer to their problems, as opposed to ours?


Mark Cannon said...

Interesting post - enjoy your blogs. Here is my take on the discussion around integration in the English NHS. Would agree that what seems to be missing is method when it comes to change

Paul Levy said...

Thank you, Mark. It is great to see the comparison.

Anonymous said...

I agree with you that ACO is old wine (HMO) in new bottles (ACO). It is well known that 94% of health care markets in USA have an oligopoly of providers and payers making price reduction difficult. Free markets will improve quality and reduce costs but the reality is that most markets are oligopolistic.
I fear that ACO may further boost this oligopolistic behavior and may even encourage monopolies

fairhavenhorn said...

I take exception to the conclusion that this is a "market failure" because I see no market. The healthcare financial system is built upon secret prices, and market systems all depend upon public prices as a core part of the information exchange and negotiation process. The present huge bills are no more surprising than the huge bills presented by a restaurant where the menu has no prices.

I do expect the successful path to include regulations, much like the system for managing food delivery involves extensive regulation. Even if secret prices were eliminated, there remain substantial disparities in knowledge and information about products. But we've established a reasonably successful market system for food production and delivery. I have more faith in patients to make appropriate decisions when properly informed than I have in regulators making those decisions for them.

I would save regulation for those situations where it is impractical to inform the patient adequately for them to make their own decision. Food safety and medical device safety are examples of a situation where it is not practical for each patient or consumer to individually assess the safety of products that they buy.

Barry Carol said...

The more I read about healthcare issues, the more conferences I attend and the more healthcare company investor meetings and conference calls I listen to, the more convinced I become that the most promising way to lower healthcare costs is to provide less healthcare. To do that, we need to change to culture of patient expectations and their collective belief that more care is better care and more expensive care is better care. It isn’t.

To attack overtreatment, I suggest the following: (1) safe harbor protection from failure to diagnose lawsuits for doctors who follow evidence based guidelines where they exist in order to reduce unnecessary or low value diagnostic testing, (2) eliminate direct to consumer advertising of drugs to lower patient requests for drugs they saw advertised on TV even if they won’t do any good or are no more effective than older, cheaper alternatives, (3) strive for more widespread use of living wills and advance directives and store the information on a registry to reduce futile and often unwanted care at the end of life and (4) payers should challenge surgeons who perform far more surgical procedures than their counterparts in other parts of the country when more conservative treatments like physical therapy or medical management might be just as effective.

For treatment that is legitimate and necessary, we should be able to ascertain actual payer contract reimbursement rates so patients can more easily get care from the most cost-effective high quality providers. As for the potential of ACO’s to bend the healthcare cost growth curve, I’m not optimistic either.

Thomas Pane said...

If there is one dominant ACO in a market, odds are we will see that dominance leveraged to extract greater returns, as you noted. This is completely rational behavior on the part of the ACO's managers.

Since they are committed to run the ACO experiment (some say "re-run"), policymakers should ensure that ACOs are exposed to real competition in each market. That might be from another ACO or from an alternative model of care.

Anonymous said...

A system to control healthcare costs by limiting care and tempering patient expectations is like shooting the horse for having been ridden into the ground.

Americans are in terrible health ( and much of healthcare costs go to treating the end stages of shoddy diets, stressful and polluted environments, and cursory education ( Patients, by definition, are already too far down the line to be the point of control. Not only are they, as a body, too disparate and uncoordinated to create the systematic change needed (but are critical to swell the volume of demand for improvement), but the medical-technological-industry was wholly crafted on their passivity. Fine time to now point the finger at those who suffer most from these costs (e.g. #1 cause of personal bankruptcy in U.S.)

As long as medicine and industry remain committed to short-term, 'I'll complain, but not really change the way I do business' thinking, expect more of the same to get worse. ACO, HMO, or government plan. We know the root causes of the much of morbidity, but are not willing to invest in the public health priorities needed to keep people (not patients) out of tertiary care. If half of every dollar that goes into medicine went into public health, the whole landscape of cost and harm would shift dramatically.

I came across this great title in an article on health in a town in PA ( Politicians are easy to slam, and often for good reason. But we can point the finger at voters, medicine, and business for not supporting the kinds of pro-health, rather than pro-morbidity, policies that will be required to keep Americans working instead of slowing dying while patched with expensive band-aids. Or, we could lock the hospital doors to all who can't afford care, ACO or otherwise. There are other costs that can come around to bite us.

David Harlow said...

I agree that we don't have ironclad evidence that this experiment will work -- but we don't have ironclad evidence that any other politically feasible solution will work, either.

Yesterday, I had a very interesting conversation with Gene Lindsey (CEO of Atrius Health - large alliance of medical groups in Eastern/Central MA - I'll be posting it as a podcast on my blog as soon as I get the transcript). He has a lot to say that is relevant to this discussion.

I believe that there are some real opportunities for improvement in care and cost through ACOs and other models now coming - and yet to come - out of the CMS Innovation Center. On the ACO front, I think the real opportunity for improvement lies with physician-led ACOs. There is great merit to the new wine/old bottles observation, but let's not forget that some of those old bottles (like Gene's predecessor organization, the Harvard Community Health Plan of yore) did a pretty darn good job of managing care and cost in a physician-led, not-for-profit setting. Atrius - and other similarly situated organizations - are well-positioned to re-engineer care processes when working with global budgets or, dare I say it, capitation. (Though let me be clear: I mean "new" capitation, with built-in quality guardrails and quality-based-only payment incentives, removing the insurance risk from providers - which was inappropriately laid off on providers by many HMOs in the go-go days, leaving a bad taste in all our mouths.)

Without "blaming the victim," there is an opportunity to bring real patient-centered care into the mix if we shift the focus away from billable encounters and procedures.

Bottom line: it seems to me that ACO development represents baby steps, but baby steps in the right direction.

Paul Levy said...

Thanks, David. How would you deal with the market power issues?

David Harlow said...

The key requirement is intestinal fortitude.

This gets back to the "politically feasible" qualifier of my earlier comment.

The Clinton plan would have used the concept of "managed competition."

The FTC/DOJ ACO rules contain (admittedly vestigal) standards for guarding against abuses of market power.

In the bad old days (cue Mike Dukakis) we had rate regulation at the state level.

I think that any solution needs to mix and match from these menu options. Since the FTC/DOJ has sort of punted here, it falls to payors and regulators of payments to be prudent buyers. They will take up that challenge only if they hear the message, loud and clear, that they must. The absurdity of continued public and private sector payor reimbursement for treatment of new patients with a cancer drug with a yanked FDA approval (to use a "ripped from the headlines" example) underscores the fact that the only message being heard (or sent effectively) is "Gummint outta my Medicare!" If consumer demand for the latest, biggest, most healthcare, regardless of efficacy and efficiency is the only, or loudest voice, then we're doomed. (See: intestinal fortitude.)

Anonymous said...


Regarding your comment:
"..... it falls to payors and regulators of payments to be prudent buyers."

The recent cozy contract between Partners and BCBS vs. the public spat between Tufts and BCBS would seem to refute your point and prove Paul's, at least in Massachusetts.

I worked in and now live in Maryland, the only rate-regulated state - although we all hated the Md. Health Services Cost Review Commission, it's looking pretty good right now compared to the alternatives.......

nonlocal MD

Alliance4Health said...

Hiding way over here in the other Washington is a Group Health Cooperative - owned by its 600,000 members and founded in 1947..

It is an integrated system (payer and providers under the same umbrella) that has higher quality care (via community checkup) then that provided via traditional providers and insurance.

Last year when other insurance providers were asking for 8 to 12% increases they kept their request for medicare flat at 0%.

To contrast that Swedish medical system which is perceived to be the highest quality (it isn't just has a stronger marketing and branding dept) in the Seattle metro area last year demanded a 20% surcharge to the largest blue or they would drop their patients.

This year shortly after opening up free standing ERs in the suburbs they were quoted as saying, "For now, though, "we're going to keep on doing the best thing for our bottom line in the short term.""

and a new suburban hospital (that the State tried unsuccessfully tried to block) announced that it was continuing to lose money and would need to do a affiliation with the Catholic system Providence.
part of that affiliation was to link their EHR's to one another but will result in Swedish no longer providing some women's health care services (abortions).

In the end does the patient benefit from different models of care? Yes but the public health/ HMO model is huge. Even though GHC is the best example of patient centered care (patient mobile access to EHR, same day appts with specialists, medical home model, divested all hospitals) most young professionals don't join it.

Gregg Masters said...

A definite risk. Yet can't the same be argued of many of the large, market dominant, 'non-profit' hospital systems? They've pushed back risk, divested their managed care joint ventures, only to circle the wagons of hospital assets, primarily to raise prices, no?

p.s. am talking with Eugene Lindsey, MD, President and CEO of Atrius Health today on this and relatd ACO issues.