Why ACOs Won’t Work

Why ACOs Won’t Work

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First, I think Accountable Care Organizations (ACOs) are a great idea. Just like I thought HMOs were a good idea in 1988 and I thought IPAs were a good idea in 1994.

The whole notion of making providers accountable for balancing cost, medical necessity, appropriateness of care, and quality just has to be the answer.

But here’s the problem with ACOs: They are a tool in a big tool box of care and cost management tools but, like all of the other tools over the years like HMOs and IPAs, they won’t be used as they were intended because everybody—providers and insurers—can make more money in the existing so far limitless fee-for-service system.

I see the $2.5 trillion American health care system as a giant health care industrial complex. It just grows on itself and sucks in more and more money. Why not? The bigger it gets the more money we give it.

How do you make it efficient? You change the game. You can’t let it any longer make money just getting bigger. The new game has to be one that only pays out a profit for results—better care for a budget the country can live with. There are lots of tools available to do that. ACOs, capitated HMOs, IPAs, disease management, enormous data mines, Electronic Patient Data Systems, and so on.

But, here’s the rub. There isn’t a lot of incentive for payers and providers to do more than talk about these things and actually make these tools work. Right now they can just make lots more money off the fee-for-service system. They demand more money and employers and government and consumers are willing to just dump more money into the system. Sure they complain about it but they just keep doing it.

On the heels of the “Patients Rights Rebellion” (or maybe better titled the Provider Rights Rebellion) in the late 1990s, a CEO of one of the biggest health plans told me, “We’ve had it. We tried to manage care. Actually got results. Then consumers and employers and the politicians all sawed the limb off on us. Screw it. Back to fee-for-service. We can make more money doing that and not take all of this heat. They won’t admit it but that is what they [patients, employers, and politicians] really want.”

ACOs won’t succeed in the near term any more than capitated HMOs and IPAs accomplished anything in their day because there is no reason—no imperative—for the health care industrial complex to want them to succeed.

Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?

Oh, there will be some providers—particularly hospital administrators—who can’t wait to build an ACO but probably more because they want another excuse to corner the primary care docs as a marketing channel for their growing system. But spend millions to develop an ACO so they can get less money? Only in the policy wonk netherland does that compute.

The only people on the ball when it comes to this ACO idea are the anti-trust lawyers and with good reason.

In my next post, I will talk more about how we might change the game so that these tools can work.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analyses at The Health Policy and Marketplace Blog, where this post first appeared.

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68 Comments on "Why ACOs Won’t Work"


Guest
Jan 7, 2015

Aco not a great idea

Guest
Jun 14, 2011

Great read. Of course, at the core, ACOs are embedded in healthcare reform and referred to in one of the most controversial laws in America, enacted just over a year ago on March 30, 2010, the Patient Protection and Affordable Care Act (PPACA). The controversy is partly because of the tension and low level of trust between private practice doctors and hospital administrators. Here’s another perspective. http://www.concerro.com/blog/?p=162

Guest
ecs
Nov 9, 2011

ACO’S the new American cancer!!!!!!!!!! A Boom for dr.s

Guest
larry w hirons, M D
Jun 5, 2011

ACOs and Actual Health Care Reform Submitted to NEJM

Fuchs and Milstein1 wonder if U. S. physicians are “sufficiently visionary, public minded, and well led” to save $640 billion in our illness care system? Judging from the failure to build on sound initiatives2,3 that should have started us down that path, the answer is no. Discouragingly, Brooks’ salient essay3, which should have become a building block to meaningful reform, is not cited in subsequent commentaries on comparative effectiveness research.

But, enter the Accountable Care Organization (ACO). My prediction has been that the ACO movement will accomplish little except generate a lot of heat and smoke, exhaust well-meaning physicians trying to engage with the movement, and generate an industry of consultants and a society or two, complete with their own bureaucracies.

But it occurs to me that ACOs, incentivised by shared savings, could be the catalyst to true reform. ACOs could band together under an umbrella organization and transform the American illness care system by: 1) acknowledging the regional variability in frequency of services provided without outcomes advantage4; 2) insisting that every specialty society produce their own “Top Five List5” and incorporate these best practices into their ACO. (the model theorized for oncology6 is inspiring); 3) insisting that insurance companies standardize to save another $200 billion1,7; 4) agreeing with my7 et al 1 essays, to insist that physicians use absolute risk reduction in describing to patients the effectiveness of alternative treatment programs, thus revealing that often there are only marginal clinical outcome differences between approaches, but orders of magnitude differences in cost; 5) adopting the “Great Expectation7” that the patient is expected to take responsibility for their own health, citing but one example, of how through life style modifications, the diabetic glacier which is sweeping the country into bankruptcy could be tamed . The AMA could fight marginalization in regard to health care reform, seize the moment and be that umbrella organization to midwife the above, actually transforming our illness care system into a viable, effective health care system.

1. The $640 Billion Dollar Question —Why Does Cost-Effective Care Diffuse So Slowly? Fuchs, Victor R., PhD and Arnold Milstein, M.D., M.P.H., N Engl J Med 2011; 364: 1985 – 1987.

2. Cost Shifting Does Not Reduce the Cost of Health Care Victor R. Fuchs, PhD JAMA. 2009; 302(9): 999-1000.

3.Assessing the Appropriateness of Care—Its Time Has Come. Robert H. Brook, MD, ScD. JAMA. 2009;302(9):997-998.

4. Gawande, Atul. The Cost Conundrum What a Texas town can teach us about health care. The New Yorker, June 1, 2009.

5. Medicine’s Ethical Responsibility for Health Care Reform — The Top Five List
Brody, Howard, M.D., PhD, N Engl J Med 2011; 362: 283 – 285 .

6. Bending the Cost Curve in Cancer Care, Smith, Thomas J., M.D. and Hillner, Bruce E., M.D. N Engl J Med 2011; 364: 2060 – 2065.

7. Great Expectations: How to Actually Transform the American Health Care System and Avoid Squandering a Trillion Dollars, Hirons, Larry W., M.D., personal communication, Jan 2010.

Guest
larry w hirons, M D
Apr 14, 2011

Great Expectations: How to Actually Transform the American Health Care System and Avoid Squandering a Trillion Dollars
Larry W Hirons, M D

This is a defining moment when change has (to) come to America. . But these are Hard Times for politicians. As I told the Oregon Medical Association 25 years ago, “Pity the poor politician. Medicare is going to bankrupt the nation. Politicians have three choices, all likely to lose them votes: 1) Reduce provider payments (which will not meaningfully reduce the financial problem but will hasten provider flight to retirement and cause hospital insolvencies); 2) Reduce plan benefits; or 3) Increase taxes. Stakeholders’ interests and political expediency, not the common good, forge current reform proposals being debated along with 360 offered amendments. Cost shifting masquerades as cost reduction. The task at hand is to save billions of dollars by actually reforming elements of our current system while saving even more billions by bridging the chasm of expectation of us patients as we welcome fifty million new insureds. This is how:

A just America will have universal health insurance for all Americans. Such insurance should be made available through a two-tiered health insurance system. Everyone gets the single payer “Chevy,” NO questions asked. Benefit inclusions will be actuarially determined based on the amount of money we are willing to devote for the number of lives needing to be covered, aka The Oregon Health Plan. Setting an upside limit on total expenditures will save billions. Additional billions will be saved in administrative costs and having but one plan to comprehend would be a refreshing. The other tier, the “Cadillac” would be any number of supplemental plans with expanded benefit packages, designed, sold and administered by the private sector to be bought by, and at the option of, the individual purchaser
Medical providers’ practices need reform. It may not be so much that doctors are paid too much for each service we do but rather that we do too many services. The indefensible disparity in services provided and costs generated, from one locale to another, to the same kinds of patients with the same kinds of problems must end. Or maybe it is that we invoke unproved services. New, always expensive, technologies should enter the market place only after their cost-effectiveness is proven. Physicians must eliminate “relative risk difference” as an argument to the patient for suggesting a therapeutic option. We know that absolute risk differences between therapeutic options for any given condition often can be modest while the cost differences between the compared options can be substantial. Finally, the time has come to implement the “appropriateness of care” strategy using available and rapidly deployable tools to compare alternatives for care for a given condition, especially since, for a given condition, there are radically different price tags between options which have fairly similar outcomes.
Tort reform, liberating for providers yet just for injured patients, is imperative. Patients should have the expectation that providers will practice the science and art of medicine avoiding defensive medicine. Faced with a patient with a likely benign headache, providers need confidence to spend the necessary time to evaluate and explain to the patient our diagnosis and plan vs experiencing ten seconds of paranoia about a possible lawsuit going on to order a $1,500 cranial M R I that only rarely will find an explanation for the headache. Billions would be saved.
Ethical pharmaceutical companies should focus on discovery of novel drugs vs “me too” drugs. Exposure to physicians should be in the educational arena and direct marketing to the public should cease.

Plunderers of Medicare, fraudulently stealing from us taxpayers, should be crucified.
Addressing the above key elements of our system while saving billions of dollars leaves a major element unaddressed, a chasm uncrossed, namely the role the individual must play to control the cost of medical care, aka the elephant in the room. The title, “America’s Healthy Future Act of 2009,” perpetuates the myth that having health insurance equates to having good health. The proponents hope we infer that reduction in health care expenditures will result. Absent my proposed changes, universal coverage will in fact aggravate our financial situation since it will increase by millions the number of us wasteful consumers of illness care resources. That is because the American Healthcare System, while superb if one is sick, is really a cost-inefficient “illness care system,” where, compared to other industrialized nations, an embarrassing gap exists between record dollars spent per capita and the comparatively poor health status and outcomes statistics purchased with those dollars. While no stakeholder is entirely satisfied with our system, one stakeholder (the elephant) passively observes while critics assign responsibility to all the other stakeholders for solving this paradox. That stakeholder is the “illness care” consumer who, having been endowed with good health at birth, proceeds to indulge in extraordinarily damaging habits such as overeating, a sedentary lifestyle, smoking, drinking alcohol to excess and use of illegal drugs, resulting in breathtakingly expensive services to salvage their health. Having resisted their physician’s advice as to life-style modification, the patient emerges from the shadows, usually during a crisis, to claim dependency on everything but themselves for remedies, seeking the “best” of illness care to restore their health. For instance, we know that overeating and inactivity lead to boarding of an obesity, sedentary lifestyle train called pre-diabetes, traveling to join, in time, the dramatically costly diabetic glacier that is sweeping the country. (Diabetics consume three times as much illness care money as compared to non-diabetics).
Among the multitude of reform solutions offered, it is rare to find articulation of the expectation that the consumer play their part to reduce billions in expenditures. Remarkably, patients elude notice as being a most potent agent for part of cost savings. How guilt-ridden providers seem to be to state the expectation that patients shoulder responsibility for solutions. Self-improvement to avoid becoming diabetic would save billions of dollars for the system and untold suffering. The universally available brisk daily walk is free and effective. Eating less to achieve weight loss, the other primary diabetes preventive measure, reduces food costs; a bonus for the patient’s budget. Instead, the solution du jour makes this patient stakeholder an ever more comfortable guest in the medical home where the provider team showers them with comprehensive service, not really challenging them with the expectation that, for their benefit, they must change. Measuring personal responsibility for change is not a scorecard criteria for grading that medical home.
The defining moment when change has (to) come to America will occur when we cross the expectation chasm to a “health care system” in which patient accountability is a sine qua non. How revitalizing if my patients said “Thank you for showing me the prediction model of me becoming diabetic in the next eight years, ” and “for showing me how weight loss of seven percent and serious daily exercise can reduce my risk of becoming diabetic by 58 percent. How exhilarating to hear, “I am convinced! I am taking responsibility for my health. I want to be the driver of my own ‘medical home train.’ I accept these expectations of me.” Our financial calamity can be averted if expectation of personal responsibility would join all these other stakeholder strategies to participate in actually reforming our system.

1Obama, Barrak. Repeatedly stated during presidential campaign 2007 – 2008.

2 Cost Shifting Does Not Reduce the Cost of Health Care Victor R. Fuchs, PhD JAMA. 2009; 302(9): 999-1000.

3 Gawande, Atul. The Cost Conundrum What a Texas town can teach us about health care. The
New Yorker, June 1, 2009.

4 Redberg, R F and Walsh, J. Pay Now, Benefits May Follow – The Case of Cardiac Computed
Tomographic Angiography, N Engl J Med 2008; 359: 2309-2311.

5 Assessing the Appropriateness of Care—Its Time Has Come. Robert H. Brook, MD, ScD. JAMA. 2009;302(9):997-998.

6 Projecting the Future Diabetes Population Size and Related Costs for the U.S. Diabetes Care vol 32 no. 12: 2225-2229, Dec 2009

7 Yates T et al. Effectiveness of a pragmatic education program designed to promote walking activity in individuals with impaired glucose tolerance: A randomized controlled trial. Diabetes Care 2009 Aug; 32:1404.

8 Wilson, Peter W F, Prediction of Incident Diabetes Mellitus in Middle-aged Adults; The
Framingham Offspring Study. Arch Intern Med 2007; 167: 1068 –1074

9 Tuomilehto, J, et al; Prevention of Type 2 Diabetes Mellitus by Changes in Lifestyle Among
Subjects with Impaired Glucose Tolerance. N Engl J Med 2001; 344: 1343 – 1350

Guest
Barry Carol
Apr 11, 2011

As it happens, the CABG occurred at age 53 and was covered by my employer provided commercial insurance policy. The problem with hospital chargemaster rates, though, is that they are arbitrary and bear no relationship to the cost of providing service even after factoring in the issue of uncompensated care. Maryland uses an all payer system which at least ensures that all payers, including Medicare and Medicaid, pay a given hospital the same rate for the same service. At the other extreme, a CFO of a well known health system that includes an AMC told a small group recently that the price they collect for a typical procedure from the large Blue plan in the market is about half of what they get from the other commercial insurers because of the big difference in market power. In Switzerland, by contrast, where there are no public payers even for the elderly, the private (non-profit) insurers in each canton negotiate as a group so they all pay providers the same rate for the same service, test or procedure in that canton. While it would require an anti-trust exemption for insurers to try something similar here, maybe policymakers should consider it.

Guest
Dan Urbach, MD
Apr 10, 2011

Sorry to hear you had to have a CABG, but what makes you think your balance wasn’t paid? It was, by cost shifting from people who had much higher than necessary premiums because of Medicare’s price controls. How is that fair? The working person pays their Medicare tax, which paid the $35K, and the premium which paid the rest. Why can’t private insurance take on the balance billing? At least then the Medicare population would contribute a fair share to their medical care expenses.

Guest
Barry Carol
Apr 10, 2011

While I agree that wealthier Medicare patients should be able to spend some of their own money to buy more of a doctor’s time and attention, I’m not a fan of balance billing. It may look like a reasonable concept to a PCP but what about surgeons’ fees and hospital charges? Suppose I get a CABG, which I’ve had, at a list price of $100K but Medicare only pays $35K. The hospital comes after me for the other $65K using aggressive collection tactics and threatens to ruin my credit rating if I don’t pay the balance of the bill or at least a good portion of it. What’s the point of having insurance if I’m going to be exposed to that much financial risk?

Perhaps an alternative approach would be to stop taking Medicare or all insurance altogether. Post your charges or your hourly rate prominently in your office and make it clear that you will work with patients of more modest means on a sliding scale basis. This approach, of course, would not work if most of your patients were in the lower half of the income distribution curve. If you’re serving a more upscale demographic, it probably would work OK. A wealthier market might support a concierge practice though I question how many patients, even if they can afford it, would pay up for that.

Guest
Barry Carol
Apr 10, 2011

Dan Urbach, MD –

I can appreciate the importance and relevance of the intangibles and nuances in referral selection that you cited. I wonder, though, out of every 100 referrals that you need to make, how many times would you send your own family member to the specialist, hospital or imaging center that happened to be the most cost-effective assuming you had the price and quality data that you deem relevant?

Guest
Dan Urbach, MD
Apr 10, 2011

That all depends on the choices available. That is going to vary a great deal from place to place, and one health care policy will not fit all.

Guest
Barry Carol
Apr 10, 2011

Dan Urbach, MD –

Do you practice in a rural area with only one hospital for miles around or in a city or well populated suburban area with numerous hospitals in close proximity?

Why should premium payers or taxpayers pay for patients to get a non-emergency MRI at a hospital owned facility when they could get one of equal quality at a non-hospital owned facility for 40%-50% less cost to their insurer? Why should they be able to get an expensive brand name drug for the same co-pay when a much cheaper generic equivalent is available? Why should they be able to go to the expensive, big name AMC for routine care that any nearby community hospital could provide just as well for much lower cost? Even if people got all or most of their care in the most cost-effective good quality settings, we would probably still have a problem with healthcare cost growth. Charging higher coinsurance to access care in higher cost settings that could be provided just as well in a lower cost setting is not a matter of sympathy or lack of it. It’s a matter of trying to efficiently allocate finite resources so we don’t go broke trying to provide people with the care they need. PCP’s are in the best position to be helpful here. I don’t think it’s too much to ask of them once we have easy to access price and quality transparency tools.

Guest
Dan Urbach, MD
Apr 10, 2011

Here’s your prior statement: “If lower income people can’t afford the higher coinsurance for the higher cost provider, I have no sympathy. They shouldn’t be going there in the first place. Even though I can easily afford the higher coinsurance, I wouldn’t go to the higher cost provider either if I knew the quality was no better than the more cost-effective alternative.”

I suppose I should put it less viscerally than I did in my last post: quality is not simply an outcome measure. The PCP is a doctor, dealing with a patient who is an ill person. Each ill person has a concerned family (usually) if the illness is serious. The doctor has usually dealt with a large number of specialists (or radiology clinics, etc) and has had good and bad experiences with them. The patient is relying on the doctor to make the best choices for them, and trusts the doctor to do that. If we are talking about choices amongst providers, then the specialists who are terrible at the bedside, or the radiology clinics who are poor at getting patients seen in a reasonable time, or who are slow at getting results transcribed and send them by snail mail; these and many more local and mostly unmeasured factors are important in the PCP’s decision of where to send the patient. These things are as important as any outcome measure. And if the PCP says, as it seems you would have them say, “The most cost effective choice for you is…,” the patient will respond, “Yes, doctor, but what do you think is best? What would you recommend for your wife, if she were in my position?”

I do think that patients should have financial risk that influence their decisions, and they will often choose cheaper over more convenient, and I think this is OK as long as quality is adequate. No I don’t think the taxpayer should be on the hook for arbitrarily high prices. However, I do not see how policy makers can determine quality or prices in a vacuum, which they have so far done, to our cost.

Guest
Apr 10, 2011

….. and the PCP, if honest, would have to say “Well, no. I would take my wife to that nice Hospital across the street because I golf with a couple of docs that work in that department and they are extremely good, and the place is very nice, but then again my wife drives a Lexus and yours drives an 87′ Dodge, so that’s life, and really that other place is very good too.”

For some reason, automobile and other goods disparities are acceptable, but when it comes to medical care, particularly for one’s children and spouse, same disparities are not acceptable, and I don’t think they should be either.

Guest
nate ogden
Apr 10, 2011

without disparaties why go to school for 8 years? Why work 12+ hour days? Why take the risk of opening a pratice? This country was built on people earning what they wanted not entitlements to what someone else earned.

Guest
Dan Urbach, MD
Apr 10, 2011

Touché, Margalit, although I doubt many spouses of PCPs are driving Lexuses (Lexi?). I agree that disparities in available care are inevitable in an affordable health care system in this country. It is absurd that a wealthier Medicare patient cannot buy more time with the doctor without the doctor being guilty of fraud. That is why I advocate balance billing. Policymakers need to stop denying that the disparities must be accepted and managed.

Guest
Barry Carol
Apr 10, 2011

Margalit –

I think tiering was an important factor driving the increased use of generic drugs and the same concept could be used to steer patients toward more cost effective hospitals, doctors, imaging centers and labs. If people insist on accessing the more expensive option because they think, incorrectly, that it’s better, then they should at least pay more out of pocket for the privilege and take some of the cost pressure off taxpayers and premium payers. If lower income people can’t afford the higher coinsurance for the higher cost provider, I have no sympathy. They shouldn’t be going there in the first place. Even though I can easily afford the higher coinsurance, I wouldn’t go to the higher cost provider either if I knew the quality was no better than the more cost-effective alternative.

With respect to marble vs. vinyl floors in hospitals, while they cost more to build, they don’t usually cost more to operate once they are built. Besides, amenities like that are often financed with considerable help from philanthropy. Labor costs are the same. So is the cost of medical supplies, utilities, liability insurance, etc. One trend that does add to both construction and operating costs is more private rooms. However, medical safety experts tell us that private rooms lower infection risk, reduce the possibility of medication errors and give patients a chance to get more rest and sleep which promotes healing.

I agree that we have quite a way to go before patients are better informed about costs vs. quality in healthcare. Good price and quality transparency tools available to both patients and referring doctors would speed the education process.

Guest
Dan Urbach, MD
Apr 10, 2011

Let’s hope people with “no sympathy” are left out of the boardrooms where policy is made. Your own construct does not make sense outside of your theory. A patient who sees a surgeon who expresses “no sympathy” but has good surgical outcomes will never see them again. The internist who has “no sympathy” but gets blood pressures under control is a poor doctor. There are more things in health care than are dreamt of in your philosophy.

Guest
Barry Carol
Apr 9, 2011

“The customer in health care is not seeking a “good enough” cheap product, because the perception is that cheap products will kill you. Nobody looking for a doctor for their child will be willing to compromise perceived quality to save 10%.”

Margalit – The perception is wrong and we’re not talking about “cheap” care. We’re talking about more cost-effective care comparable in quality to that offered at the more expensive hospitals. It’s well known that there are hospitals, especially famous Academic Medical Centers, which command high prices because of their local or regional market power, NOT the quality of their care. There are plenty of local community hospitals that can perform a wide array of standard and routine procedures just as well as the AMC’s for considerably less money. I, for one, don’t want to pay for patients to go to AMC’s for routine care just because they think, incorrectly, that they’re getting better care when they aren’t. In Massachusetts, the AG’s study noted one case of an interventional cardiologist that did the exact same procedure in the same way with the same equipment in two different hospitals in Boston, one of which was part of the Partners system. The episode commanded a significantly higher price when it was performed at the Partners hospital because of their market power. The outcomes were the same in both places.

If I need a colonoscopy, it can be done perfectly well at my local community hospital. If I need an MRI, the local non-hospital owned imaging center will do it for 40%-50% less than the hospital owned facility on comparable state of the art equipment. If I need a statin or a hypertension drug, there are generics that are just as effective as the brands and cost far less. Patients who need hip replacements or back surgery and are given full information about the risks and benefits of the procedure opt to not go through with the procedure at least for the time being and will try physical therapy instead about 20% of the time.

Several years back, I saw an assessment of the outcomes for 54 cardiothoracic surgeons in Boston. They were rated one, two or three stars with one star meaning results were worse than expected, two meant as expected and three meant better than expected. Of the 54 surgeons, 52 received two stars yet the price variance paid to the hospitals they practiced in varied widely depending on their market power.

It’s not helpful to keep suggesting that the more expensive hospital or the more expensive doctor must be providing better care. There are, of course, sophisticated procedures like organ transplants and treatment of rare cancers that only the elite institutions can handle. I’ll bet, though, that the revenue accounted for by those procedures is comparatively small for those hospitals. For most procedures, comparable quality is available at non-teaching hospitals for significantly lower prices even for Medicare and Medicaid patients. With better price and quality transparency tools, referring doctors can help to steer more patients to the most cost-effective, good quality providers.

Guest

Barry, I don’t disagree with the premise that equally good, or even better care, can be obtained at less expensive venues.
However, the average customer does not know that and until enough information is disseminated to change customers’ perception, referring patients to “cheap” places will be viewed as withholding care.
It took a long time for the public to become comfortable with generics, and those could be easily and accurately compared to brand name drugs. It is going to be much more difficult to convince people that they can get the same level of care on vinyl floors as they get in marble palaces, and those who keep building palaces even today, at an alarming rate, have no interest to dispel this common perception.
It’s an uphill battle, made difficult by much anecdotal evidence and by fierce opposition from the “big” guys.
Just look at the new Taj Mahal Kaiser put up right next to where laws are made. Probably could have built 100 clinics in low income areas with that non-taxable money. What do you think is the statement they are really making in full view of Congress?

Guest
Apr 9, 2011

See “Talk to The Invisible Hand”

http://www.slate.com/id/2229839/

Guest
Barry Carol
Apr 9, 2011

“Perhaps we just need to agree what type of risk is more acceptable in health care: withholding needed care, or bestowing more care than necessary.”

Margalit – I don’t think that’s the issue. If I go to a hospital ER complaining of vague stomach, chest or back pain, tests need to be run to determine what’s wrong with me as numerous conditions have similar symptoms. The hospital in this case is functioning as what Clayton Christensen in his book, “The Innovator’s Prescription,” calls a “solution shop.” Fee for service payment is appropriate in this context. If it is definitively determined that the patient needs a CABG or hip replacement or back surgery, then we get into what Christensen calls a “value added process shop.” Here, a bundled or episode payment is appropriate. Capitation could work in primary care if it is backstopped by either outlier payments for complex cases or reinsurance beyond a certain claims threshold either at the specific patient level or the aggregate panel level.

To determine what care is “necessary,” patients should have something to say about this but some doctors don’t try to find out what patients want and don’t want. This is why I emphasize the need for shared decision making for surgical procedures, palliative care counseling at the end of life, and oncologists who are willing to work closely with palliative care specialists instead of just pushing ahead with aggressive (and expensive) treatment whether the patient wants it or not. Once patients have articulated their end of life preferences, it’s important to store that information on a registry so it’s available to providers anywhere when needed. I think the opportunities to save money are quite significant if we make more effort to help patients to make informed choices about their care so we can withhold unwanted care rather than bestow more care than necessary which fattens the bottom line of providers and drives up insurance premiums and taxes needed to pay for Medicare and Medicaid.

Guest

Barry, the comments order seems out of whack, but I assume you were talking about the risks of under treatment as opposed to over treatment.

I don’t quite agree with Mr. Christensen’s views on how health care should function and with the fragmentation of care in a pattern that is different than what we see today, but nevertheless it seems much more dysfunctional than what we have, even if we assume that the “instructions travel with the part”.
Anyway, people that want to change a particular market, or disrupt it, need to first understand the customer. The customer in health care is not seeking a “good enough” cheap product, because the perception is that cheap products will kill you. Nobody looking for a doctor for their child will be willing to compromise perceived quality to save 10%. Nobody is looking for buy-one-get-one-free and nobody can shop end of season sales.
You can argue that this is a result of insurance, and “no skin in the game”, but I think folks were searching for quality doctors before insurance was invented, and people have plenty of skin and other organs too in this game. And that’s precisely the problem.
When you buy a cheap T-shirt at Walmart, or a cheap ticket from Southwest, the worst possible consequences are that you’ll need to buy another T-shirt in two weeks, or suffer through some inconveniences for the few hours that you fly. If you buy cheap care, you could kill or harm your child forever.
So before you have any expectations for price-based competition in health care, you would have to establish an exact equivalency between cheap and expensive services. I guarantee that nobody would go to Walmart for $4 meds if they were some crappy Made in China brand. People go to Walmart because the drugs are the exact same ones they get at the pharmacy for more money. If Walmart can offer a Harvard trained, NEJM published, physician consultation for $4, I’ll be the first one to stand in line, otherwise don’t bother. It won’t work.
So yes, talk to patients, let them make the tough decisions and then abide by whatever decision they made. It may reduce the volume of services, particularly at end of life, but don’t expect them to choose to see an NP behind the canned goods aisle and call it health care.

Guest

Wow, Nate. I actually agree with you about FFS. In my world, there are two types of project contracts: fixed price and time & materials. The former being akin to capitation and the later similar to FFS (to a certain degree).
Fixed price contracts are used for rather simple things with little to no potential for surprises. Many corners are cut during these types of projects.
T&M is not always more expensive, but it certainly can be, and it is usually reserved for complex and important projects involving lots of expertise.
Depending on the contractor, both types of contracts can be, grossly abused or equitably discharged.
Perhaps we just need to agree what type of risk is more acceptable in health care: withholding needed care, or bestowing more care than necessary.

Guest
nate ogden
Apr 9, 2011

“Use a steak knife to take my own appendix out?”

Margalit that’s just being ridiculous, use a fillet knife, are you trying to leave a worse scar?

Guest
Dan Urbach, MD
Apr 9, 2011

Nate,
I don’t think there’s a simple answer to your question. Under price controls, fee for service works reasonably well as long as the fees keep the supply of health care adequate to the demand. But that’s the problem. The price controls have failed to evolve that way.

Guest
nate ogden
Apr 9, 2011

I would say that was the transition from 50% OOP to under 13% OOP. If we moved OOP back up to a more reasonable amount then we would be more likly to have a functioning market. Consumers paying out of pocket for routine care with their own money is more likly to create a balanced market then having it paid by insurance or rationed by a captiated provider.

Guest
Dan Urbach, MD
Apr 9, 2011

I agree that low out of pocket exposure is part of the problem. A couple of practices in my area have systematically reduced their prices for people who are uninsured (although in practice most doctors that I know will do that on a case by case basis). I only refer my uninsured cases to the one radiology clinic I know does that, and their prices are far below the hospitals’. There is a GI practice in town that sent letters out saying they would do colonoscopies for lower rates for those without coverage. They have followed up to tell us that they’ve found some cancers in patients who didn’t get the scopes soon enough because of expense. If they were closer to my office, I’d send them every colonoscopy I could, not just because of the lower price, but also because they are good citizens for doing that.

But how do you increase out of pocket without hurting a lot of people? I think that’s the intention of the benefit voucher idea, but I don’t think the voucher system would work for this. I’d suggest that balance billing should be allowed, and that providers of all kinds should make their prices known. That will certainly not solve everything, and some people could not afford to pay the bill. That’s why I advocate means testing. I suggest that people with less than some amount of wealth be protected to some extent, or that there be an out of pocket maximum amount calculated for their economic status (not the same for all).

There is a lot of talk about people with high OOP (e.g., on high deductible plans) failing to get needed services. I have seen this myself. However, I don’t think this is a good argument against increasing out of pocket. People need to take responsibility for themselves. I do think it probably increases expenses in the end (because of higher degree of illness later), but I don’t think we know how much, and one could incentivize people in this regard. E.g., maybe premiums could drop for each year that a diabetic gets his/her hgbA1c done, and even more if it’s controlled.

I’m sure there are many arrangements for incentivizing good preventive practices that we could think up. Most importantly, creative problem-solving should be encouraged and rewarded.