I'm nervous about Accountable Care Organizations (ACOs)

Getting a handle on runaway health care costs is making a lot of very smart people bust out in a cold sweat.  The Health Reform legislation doesn't appear to fix how we deliver health care or how the money flows in the system - the two changes we must have if we are to get better results and 'bend the cost curve.'

Some very smart people in a cold sweat are proposing Ambulatory Care Organizations (ACOs).  The idea is simple - a vertically integrated delivery system can better manage costs since it has control of the vertically integrated system.  Give them a lump sum payment that on the average will reward them for the judicious use of medical resources.

So far so good.

The problem is that the experience in the past has not lead to the golden land of judicious and appropriate use that reduces costs while delivering excellent care.

Hospital are typically the anchor of these systems and if they do a good job to reduce the big ticket costs they have to slash the throat of their own cash cow: the hospital.  Hospitals make money on all the high ticket items done no matter if that is something helpful to the patient or only helpful to the hospital's bottom line.

In theory ACOs are a great concept but what will happen in the real world?  Science tells us that past behavior is the best predictor of future behavior.  In the past when hospitals and large systems took total risk as Managed Care Organizations (MCOs) most of them felt bad about taking the knife to Bessie and things muddled along pretty much unchanged (hence the current flood of perspiration).

I don't think hospitals or the people who run them are bad, but their organizational behavior in the past does little to convince me that they will perform any different as ACOs than they did in the past as MCOs.

Comments

[2healthguru]

Gordon, if one views the ACO via the traditional lens of PHOs or IDN's where the institutional partner is center stage and physician participation is either token or tethered to a majority non physician managing partner, I would say your fears are well founded, I do however believe, there is room enough for granular innovation in the new law particularly as it relates to patient centered medical homes or an aggregated version effectively constituting an ACO or even super/networked ACO.

Love the visual!

See some of my thoughts here: http://2healthguru.wordpress.com/

[donspinelakemed]

You are absolutely right on about this, Gordon.

Better care management, and fewer inappropriate procedures, will hurt the hospitals, many of which will need to get smaller and to offer fewer services in the ideal world of appropriate care. The big money makers for the hospitals are the ancillary imaging services, and the emergency rooms that have unrestricted use of these services, without preauthorization. New and high-tech surgical procedures are paid fairly well, but may have no better outcomes than older, more conservative and less costly care. There is tremendous waste when there is unnecessary duplication of services, and no incentive for a hospital to shut down programs it offers just because the hospital down the street has adequate capacity to provide these services.

The only organizations I know of that do reasonably well at this are the staff model HMOs, who own their own hospitals, employ the doctors, and even own the pharmacies. And, they ARE the insurance company, so there there is really a full allignment of interests among all of the participants. But, even successful large organizations (like Group Health Cooperative) took many years developing the culture of "doing the right thing," and it is unlikely that these successes will be duplicated all across the country when they are competing with for-profit and not-for-profit insurance companies and hospital systems.

The idea that large organizations are necessary to provide appropriate, high-quality care is really quite appalling, and the concept of "Accountable Care Organizations" is just one more concept that looks like it might work, but has not been tested. Going down that path may well increase the cost of care for all by increased organizational and overhead cost, without necessarily any improvement in patient-centered outcomes.