What's up? Well, the theory is that risk-based payment mechanisms like "accountable care, bundled payments and other contracts with the potential for rewards or penalties based on quality performance and better cost control" will bring about greater efficiency and higher quality in the health care system. It is argued that the current system, mainly based on fee-for-service schemes, leads to overtreatment and waste.
In the midst of all the excitement, there are very few thoughtful observers who raise questions about the march.
I've devoted a lot of columns here to the unanswered questions and potential unintended consequences associated with risk contracts. I've also been hard on the health care industry for a lack of analytical rigor when it comes to designing public policy prescriptions to deal with rising health care costs. I don't want to go through all those arguments now, but let's just outline some as yet unanswered concerns:
1) As risk is shifted from insurers to providers, what adjustment will be made in the insurers' cost of business, and how will those adjustments be passed along to consumers. A reduction in risk should be accompanied by a reduction in capital reserve requirements of insurers: How and when will those huge investment accounts be reduced and redistributed to the public? Likewise, if payments are made on the basis of annual population rather than individual claims, when will the insurers stop adjudicating claims data and reduce the size of their staff involved in these functions? When and how will those savings be passed along to consumers?
2) The decisions by ACOs to take on more risk is already driving mergers and acquisitions as those entities try to expand their risk pools. That market concentration acts to increase the leverage of the providers over local insurers, driving up rates (whether fee-for-service, capitated, or bundled). How can we be sure that whatever savings might emerge from risk contracts are not offset by the greater market power of provider groups vis-a-vis insurers?
3) What will be the internal distribution of risk and reward for the various physician specialties within ACOs? How will that negotiation take place? Is there any reason to believe that the current fee schedules which offer higher relative payments to proceduralists than cognitive specialists will not form the base for ACO internal transfer pricing? If there is a surplus within an ACO, which doctors will get which share? Likewise, if there is a deficit?
4) Similarly, what will be the internal distribution of risk and reward for the various entities within ACOs--the tertiary care centers, community hospitals, multispecialty clinics, and post-acute care facilities. If there is a surplus within an ACO, which facilities will get which share? Likewise, if there is a deficit?
5) What will be the governing structure of ACOs? If, as is often the case, the large tertiary centers hold the cards, how can the other players within the ACO rest assured that they will be treated fairly in matters of risk and reward allocation?
6) And finally, if quality metrics are not properly drawn, don't risk-based contracts offer the potential for undertreatment of patients, swinging the pendulum too far in the other direction?
“If all you're going to do is you're going to put providers at risk for cost, but you don't have a robust system for measuring quality, then you're not leaving patients better off,” said Dr. Ashish Jha, a Harvard University health policy professor.
We are all pleased, of course, to see the following kind of optimism:
“As a doctor, I am very excited about the direction this is going,” said Dr. Stephen Ondra, chief medical officer of Health Care Service Corp. “For much of my career, payers and providers had an adversarial relationship that often created win-lose choices.”
But I fear that Dr. Ondra and his like-minded colleagues are naive. The adversarial relationship he sees today may very well be replaced by a new set of adversarial relationships--between physician specialties; between tertiary and other health care facilities; and, sadly, between patients and ACOs. The main drivers of health care costs are not overuse related to fee-for-service care. As I have noted here, they start with the changing demographics of society. Fee-for-service is way down the list. Quoting myself:
If we were being rational and rigorous about policy prescriptions, we would rank order these causes and determine the costs and benefits of policies that might offset them. For example, we cannot change demographic patterns, but it could make sense to introduce public health programs to promote exercise and proper nourishment. We could change the compensation system for primary care doctors so they could spend more time with patients. We could subsidize physician education so they wouldn’t have to earn so much to pay off loans. We could reform malpractice laws to reduce defensive medicine. And we could certainly engage in full-scale process improvement training of doctors and implementation of those techniques in hospitals to reduce the extra medical costs associated with harming patients. (Those of us who have done the latter have demonstrated conclusively the cost savings, not to mention the mortality and morbidity benefits.)
But, our public policy leaders have not done this. Instead, they assert that pricing-based over-treatment is the key problem, and they offer capitated rate plans and bundled payments as the solution. If you look closely, you will find that most of those proposals come from payers, either insurance companies who have a corporate desire to shift risk to providers or government officials who are trying to reduce appropriations. Or from economists, who have a tendency to simplify market behavior and blame everything on pricing regimes. As I have said, when you have a hammer, everything looks like a nail.
We shouldn’t dismiss a change in the payment system just because it might benefit the insurers or the government, but we also shouldn’t adopt it just for that reason -- or because it fits into economists’ idealized models. Instead, we should determine how big a portion of the over-treatment problem comes from the payment system versus other causes. And then we should rigorously review the experience of such regimes and evaluate their costs and benefits. We should also determine how practical it is to implement a new pricing regime.
I have a deep seated feeling that the march that is seen as so optimistic today might start to feel more like Napoleon's attack on Moscow, nicely represented in the chart above from Edward Tufte.