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In the latest edition of Health Affairs, Dr. Francis Crosson, chair of the Council of Accountable Physician Practices and senior fellow at Kaiser Institute of Health Policy, offers an impassioned defense of Accountable Care Organizations. Crosson’s main point is in his title: “The Concept is Too Vitally Important to Fail.” He adds:

“The accountable care organization model is intended as an option both for Medicare and for non-Medicare, commercial health care services. However, the general model and the specific shared savings model proposed for Medicare have come under criticism. Much of the criticism is valid and should be addressed. However, none should serve to prevent the evolution of this model.”

If the concept is “It sure would be nice to hold down costs and improve quality” then how can I argue? Who wants to argue against God, Mother or Country? But if the concept is “The only way to save the healthcare system is to organize everyone into ACOs,” well forgive me for disagreeing.

Accountable care organizations are the creation of the government. As such they come with a set of rules. There are rules about who can organize ACOs and who cannot and the extent to which ACOs must be integrated. There are rules about how costs will be shared between the government and the ACOs. There are 65 pay for performance quality measures. And there are still pending rules that may allow ACOs to skirt antitrust laws. Once these rules are in place, they will evolve slowly if at all, even if newer and better ways to deliver care emerge. (More to the point, rules will squelch incentives to develop newer and better ways to deliver care.)

Are these even approximately the right rules? They were not designed by politicians, thank goodness. They were largely designed by academics and policy wonks, and not just any academics and policy wonks, but some of the best and the brightest. I know many of them – some are my friends and a few are as smart as I am, perhaps even smarter. The academic policy crowd may be smart but this entire approach to policy would benefit from a little bit of humility. Consider that many of those declaiming “ACOs or bust” were saying the same thing about integrated delivery systems in the 1990s. Are their memories that short? (Dr. Crosson continues to be a huge supporter of IDSs.)

There is another set of academics that is highly skeptical of integrated models, including ACOs. Many, like myself and Wharton’s Rob Burns, are associated with business schools and work in the field of business strategy. Does our background inform us in ways that academics from other disciplines do not? Perhaps so. (Dr. Crosson’s arguments in support of integration seem to gloss over basic business strategy issues.) Our research has taught us to have reservations about integrated delivery models, and this is not second guessing. We were first guessing in the 1990s, questioning the wisdom of integration at a time when many academics and policy wonks were singing its praises.

I believe strongly in viewing ACOs through the lens of business strategy and when I do I remain skeptical. But I am not presumptuous enough to claim that I know the truth. Nor would I set national policy based on how I view the world. I don’t know for certain whether integration or virtual organizations or something in-between will work best. But I do know how we can find out – put them to the market test. (That is how we learned that 1990s-style IDSs did not work.) Give seniors vouchers and let them face the marginal costs of their decisions. Risk-adjust Medicare payments to plans and do whatever else is necessary to limit selection. Get rid of tax subsidies for private insurance. Publish plan level quality data – there are some amazing advances in patient reported outcomes data that would provide meaningful comparisons. These are all reasonable government intrusions, providing a context for competition but leaving plans free to choose how they wish to create value for their enrollees. If they want to continue paying fee for service to independent providers, let them. Others may have narrow networks with gatekeepers. Integrated organizations may emerge and maybe one of them will dust off the rules that were written for ACOs and give them a try. If Dr. Crosson is correct, that organization will succeed and grow.

David Dranove, PhD, is the Walter McNerney Distinguished Professor of Health Industry Management at Northwestern University’s Kellogg Graduate School of Management, where he is also Professor of Management and Strategy and Director of the Health Enterprise Management Program. He has published over 80 research articles and book chapters and written five books, including “The Economic Evolution of American Healthcare and Code Red.”

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29 Responses for “Trying Too Hard to Save Medicare”

  1. steve says:

    1) IMG and and The Mayo Clinic are next of kin to ACOs. They work pretty well. Is that transferrable? I do not know.

    2) Business credentials are no different than any other. It is the ideas and results that matter. Many business people worked for Enron and Lehman Brothers.

    3) As a physician, I am loathe to set national policy out on an unproven course. I much prefer working models, before embarking upon a more widespread endeavor. There is no functioning market model like you describe in medicine. There are many functioning models with much lower costs and universal coverage around the world. You need to make the case for why we should reject those and try the untested. At least run a pilot in some individual states first.

    Steve

    • Nate Ogden says:

      IMG? InterMountain Health Group?

      “IMG and and The Mayo Clinic are next of kin to ACOs. They work pretty well. Is that transferrable?”

      To CA, Boston, NY Miami no. To midwest rural america yes

      “At least run a pilot in some individual states first.”

      Would be great if government would get out of the way and let us. I would love to captitate PCP under a self funded plan but its illegal with an HMO license. 200 life group isn’t going to spend 2 million for an HMO license.

      Innovation is now illegal in insurance/HC Delivery

      • steve says:

        The ACA, IIRC or at least a recent modification, specifically allows individual states to experiment if they want. For that matter, I dont see why individual states could not have done this in the past.

        Steve

  2. Craig "Quack" Vickstrom, M.D. says:

    Medical care is provided much more cheaply, to many more people, with more satisfaction, to patients and physicians around the world. Why can’t we import their models, eh? Why are more fellow Americans so obsessed with reinventing the wheel? Oh, I forgot, American “exceptionalism!”

  3. So basically, all the “reasonable government intrusions” involve shifting as much cost as possible to seniors, and patients in general, while increasing “freedom” for insurers.

  4. Eric Tremont says:

    I respect Kaiser’s track record on the West Coast but the inconvenient truth is that Kaiser has encountered major difficulties exporting its delivery model in Texas, North Carolina, Massachusetts, Ohio, and Kansas City. Given this problematic track record, why should anybody have confidence in Dr. Crosson’s faith in accountable care organizations. Like the Swedish style of socialism, it is wonderful when it works but all too often it ends up looking more like Haiti or other failed states.

  5. nmimi says:

    1) IMG and and The Mayo Clinic are next of kin to ACOs. They work pretty well. Is that transferrable? I do not know.

    2) Business credentials are no different than any other. It is the ideas and results that matter. Many business people worked for Enron and Lehman Brothers.

    3) As a physician, I am loathe to set national policy out on an unproven course. I much prefer working models, before embarking upon a more widespread endeavor. There is no functioning market model like you describe in medicine. There are many functioning models with much lower costs and universal coverage around the world. You need to make the case for why we should reject those and try the untested. At least run a pilot in some individual states first.

  6. Deron says:

    It’s interesting because I took about a two year break from THCB and I came back feeling like I haven’t missed a beat. The conversations are still the same. Are we defining insanity here? We don’t have healthcare problems in this country, we have societal problems. As long as we have high levels of greed, and low levels of personal and social responsibility within the population, we will battle these same symptoms (not problems). You can’t legislate, regulate, or redesign things like greed, sloth, envy, etc.

  7. kenmandellMD says:

    Deron is exactly correct. With the downturn in the economy I am sure health care costs will be down as well. EMR for all will haelp repeat labs and proedures. I also believe that no new drugs or technologies should come to market if not thouroghly proven to be better than what is currently available. Make brand name drugs generically available faster. Demand a co pay from all medicare patients, and lower the medicare age to 50 and all of your problems are solved.

  8. tim says:

    “But I am not presumptuous enough to claim that I know the truth. Nor would I set national policy based on how I view the world. ”

    This is not yet untrue; it is formally incoherent. You would set policy based on how somebody else views the world? Based on how nobody views the world? Based on how the population views the world? (Good, that’s called an election.)

    Other than this ritual humility, your skepticism is good, but not deep enough. Let yourself come to the light; admit to yourself the government employed wonks you so admire are actively hostile to “business strategy” and think markets are morally evil. So much will clear up for you.

    • Is there a substantial difference between “government employed wonks” and non-government employed wonks? Or does it vary based on the current flavor of government?

      • Nate Ogden says:

        accountability? Government tends to employ wonks of one political leaning. Non government employemnt wonks can peddle their wares to propogandist from either side. A liberal wonk does have a much bigger potential market either way though.

        Far less accountability working for the governemnt as well, you can turn in blank paper under a government contract and get paid.

        • steve says:

          In theory, maybe. In reality, we can vote out government that we are unhappy with. We have no ability to vote out private sector wonks. In the past, we could do so by not buying their products. In the past, that meant that private sector experts had to come up with sustainable ideas if they wanted to remain employed. Now, salaries are so skewed at the top that it is possible to become very wealthy in just a few years. The experts, and those who use their ideas, do not need to create a business model that is in the best long term interests of the shareholder. They can, and do, create entities that reward them with huge incomes in a short period of time, while dumping the risk on others.

          Businesses, not most of them thank goodness, have learned to make money by hiding information from consumers and making it difficult to evaluate them. This is concentrated in the financial sector, but is a problem in very large businesses also. We need to find a way to put downside risk back into business for those at the very top.

          Steve

    • BobbyG says:

      What is the proper moral purpose of markets?

    • steve says:

      Not true. All economists are market oriented. Some believe that markets have failed for private insurance and will continue to fail. I know of no health care economist advocating that we do away with markets that are currently functioning well.

      Steve

  9. Matthew Holt says:

    David is correct here. If you put another actor on the field and dont change the incentives (his bit about “Give seniors vouchers and let them face the marginal costs of their decisions. Risk-adjust Medicare payments to plans and do whatever else is necessary to limit selection. Get rid of tax subsidies for private insurance. Publish plan level quality data “) then you’ll get ACOs that either change to become the rapacious integrated systems of the 1990s (Sutter, UPMC, Partners et al) OR will basically almost go out of business doing the right thing (Intermountain, Virginia Mason). The question is not whether the ACo rules are too tough or whether it’s the right model, it’s whether the nations politicians and employers (who write the checks) will have the balls to pay in a different way. So far the history on that suggests that the prognosis is poor. But if we’re going to change, then change has to start somehow.

    • Nate Ogden says:

      “The question is not whether the ACo rules are too tough or whether it’s the right model, it’s whether the nations politicians and employers (who write the checks) will have the balls to pay in a different way.”

      Do you really think there is a lack of employers willing to take a chance? When we design and implement healthplans what the government allows is always a much bigger problem then what the employer has balls for.

      This isn’t to say all employers are willing to take chances but if you really wanted to unleash innovation is payment systems you would have government take their foot off the throat of employers.

      • Nate, you may have explained this before, but I am not sure I remember. What would employers do if government moved aside?

      • MG says:

        “Do you really think there is a lack of employers willing to take a chance?”

        Absolutely. While there are a few large self-funded employers and employer coalitions that This is readily apparent from the work I have been doing when locating at providers who really are trying to move in this direction and finding a hell of a time getting self-funded employers to pony up to a risk-bearing kind of contract.

        Just go read the 2010 GRIPA (Greater Rochester IPA) annual report who did get promotion to become a clinically-integrated physician from the FTC but have had a real uphill climb to get self-funded employers in the Rochester area on board with what they were doing.

        • Nate Ogden says:

          you seem to have lost some thoughts, I think I follow what you were saying though.

          Do you have a link to the 2010 GRIPA? I’m also curious if you got permission from the NY? DOI for GRIPA to take risk? Without a risk baring entity there is nothing an employer can do, that alone might be what is holding you back.

          Why do they need to be large self funded employers? Why not the guy that owns a manufacturing plant with an aging work force struggling to afford insurance, he would be a much better canidate.

          NY is probably the secondest worst state in the US to try this by the way, I personally won’t work in NY unless dragged there kicking and screaming.

          Your next problem is large coalitions or employers usually have large brokers, these people don’t take risk, they have nice comfy jobs making great salares and they don’t risk that on new ideas. No one ever got fired for placing business with empire BCBS. Setting up a self contracted risk baring network, if it doesn’t work someone would be blamed and expected to pay the price.

          If GRIPA is putting out annual reports sounds like they got some cash, do they have their own risk baring facility?

    • Yes, change has to start somewhere, and maybe one day we will have a true Democrat in the White House and change will be initiated somewhere.

      Today Medicare has been placed on the table and I hate to even think about Medicaid’s fate since it seems that only Medicare and SS are “the most important social safety nets that we have”, and even those are up for dissection….

      • Nate Ogden says:

        Today’s seniors saftey net is their great grandkids anchor. 100 trillion of debt Margalit, that is not the type of inheritance we should be leaving behind.

        What entitles one generation to take so much from future generations?

  10. The US health care system has been touted for quality since at least the middle of the 1900’s. The need of health care has also increased over the time as a result of a growing elderly population; epidemics of obesity and many diseases including diabetes mellitus, cardiovascular diseases such as coronary artery disease and stroke, neurodegenerative diseases such as Alzheimer’s disease and Parkinson’s disease, neuro-developmental diseases such as ADHD and autism, cancers and others. In addition, the costs of drugs and medical equipment have also risen, especially when the demand outpaces the supply. At the turn of 1980’s, all non-profit community hospitals were quietly incorporated into the non-profit-but-actually-for-profit health systems (hospital corporations), which have increased their charges more than 10 folds. The rising health care cost has made more Americans lose their health insurance coverage and ability of seeking health care. [1]

    Unlike the ordinary business transactions and except the cosmetic procedures and treatments, health care is not a luxury item but a matter of necessity. When one is ill or has a health concern, he has no choice but seeking health care, and does not have the option of shopping around for better price and care. He is a sitting duck, and may risk his or even his family’s savings. [2] The best way for him to avoid such a health and financial disaster is to keep him healthy with both disease prevention and autonomous care. [3]

    As a physician who believes in health care is a private matter solely between the patient and his physician, this author joined in campaigning for health care reform in the early 1990’s. When the Medical Savings Accounts became laws in 1996 [4], he enrolled his family in the MSA plan (MSA) with a high-deductible catastrophic health insurance plan in 1997, and continued with the new Health Savings Account plan (HSA) in 2004. [5] He and his family made efforts to stay “healthy”, and did not have to use health care very much during those years by living a “healthy lifestyle, which included no smoking or use of alcohol, and healthy diets mainly with high-carbohydrate low-fat foods.”

    While he had been busy in serving his patients during his active practice, he accidentally found out he might have suffered from arteriosclerosis and atherosclerosis, after realizing his systolic blood pressure was at a dangerous level along with overweight and a list of cardiovascular symptoms in June 2002. Being disappointed at the failure of his “healthy lifestyle”, he began to conduct self-experimentations for restoring his health with no medication. A no-salt diet of four months with careful fluid restriction did not help improve his blood pressure or other symptoms. He eventually lost weight and improved his cardiovascular symptoms including blood pressure by restricting carbohydrate foods. In addition, he has enhanced his immunity against infection and kept a very low level of inflammation without the need of medication. [6, 7]

    In 2007, he was required to enroll his wife and himself in Medicare, because the size of the health plan for his office did not qualify his family to continue subscribing to a high-deductible catastrophic health insurance plan with his family Health Savings Account. Before the changes, he and his wife paid less than $400.00 each for the premiums of the high-deductible catastrophic insurance policy. At the same time, he and his wife could use their family Health Savings Account to pay for the deductible in the event when they needed health care. Both the Health Savings Accounts and Medical Savings Accounts, like the Individual Retirement Accounts (IRAs), allow them to rollover the balance of their account every year into the next year for the future need of health care.

    Because both this author and his wife have been making their efforts in keeping up their health with carbohydrate-restricted diet, they are confident that they will need very little health care. They opted to enroll themselves in the Medicare Advantage Plan, as no Medicare Medical Savings plan has been available in their state. [8] However, this author was mystified when he learned that Medicare had to pay at least $800.00 or 900.00 in monthly premium for his Medicare Advantage plan. Why has Medicare not pushed for the Medicare-owned Medical Savings Account plan, which can save Medicare a lot of money and avoid rationing health care to its beneficiaries?

    Here are this author’s suggestions.
    Medicare should promote disease prevention and management to its beneficiaries with carbohydrate-restricted diet, which helps individual lose weight, control blood glucose, improve the existing diseases, and prevent the development of new diseases.
    Medicare should offer every beneficiary a free semi-annual two-hour series of blood glucose for educating the Medicare beneficiary about the impacts of the carbohydrate foods on his blood glucose level and detecting his potential of becoming diabetic sooner for disease prevention.
    Medicare should make the Medicare-owned Medical Savings Account plan available to all Medicare beneficiaries. Allocate up to $500.00 monthly, at this time, for the premium of a High-deductible Catastrophic Health Insurance plan, and deposit the balance of the currently budgeted Medicare monthly premium, say $400.00, into the Medicare-owned Medical Savings Account for each Medicare beneficiary who opts for the Medicare Medical Savings Account plan.
    With certain financial rewards to the Medicare beneficiary for his efforts in restoring his health and disease prevention, Medicare is able to reasonably save its expenditure by reducing the utilization of health care, and, at the same time, to avoid rationing care to its beneficiaries. With the benefits of carbohydrate-restricted diet in disease prevention and management, and the financial incentives, health care will remain a private matter solely between the patient and his physician.

    This health care reform model is sensible not only for the Medicare program but also for the entire US health care system including the Medicaid program. It should also be a workable model for the health system of other countries, which are faced with financial insolvency and rationing health care.

    Robert Su, Pharm.B., M.D.

    References:

    1. Centers for Medicare and Medicaid Services. “National Health Expenditure Data.” https://www.cms.gov/NationalHealthExpendData/01_Overview.asp#TopOfPage
    2. Smith RB. “ Autonomous Care” http://www.autonomouscare.infohttp://www.autonomouscare.info
    3. JEV Publishing. “Your Health Care Spending Bites Away Your Savings.” The News, Carbohydrates Can Kill. December 24, 2010. http://www.carbohydratescankill.com/1121/your-health-care-spending-bites-away-your-savings
    4. Thomas. “H.R.3103 — Health Insurance Portability and Accountability Act of 1996 (Enrolled Bill [Final as Passed Both House and Senate] – ENR).” http://www.gpo.gov/fdsys/pkg/BILLS-104hr3103enr/pdf/BILLS-104hr3103enr.pdf
    5. Govtrack.us. “H.R. 2596: Health Savings and Affordability Act of 2003.” http://www.govtrack.us/congress/billtext.xpd?bill=h108-2596
    6. Su RK. “Carbohydrates Can Kill.” The Blog. Carbohydrates Can Kill. June 26, 2009http://www.carbohydratescankill.com/83/carbohydrates-can-kill
    7. Su RK. “Podcast Episode 1: Why Carbohydrates Can Kill.” The Podcast. Carbohydrates Can Kill. June 16, 2010. http://www.carbohydratescankill.com/265/podcast-episode-why-carbohydrates-can-kill
    8, Centers for Medicare and Medicaid Services. “Medicare Medical Savings Account Plans.” “http://www.medicare.gov/Publications/Pubs/pdf/11206.pdf

  11. MG says:

    It utterly baffles me on how anyone could seriously suggest that Medicare beneficiaries should receive a voucher/tax credit from the gov’t to purchase insurance and they should be solely responsible for choosing the recommended services they need.

    I encourage all those who recommend this policy to go to a SNF, a senior center, or any other place where you have a number of people in there in their late 70s and older. Sit down with those people at dinner at 5 PM. Try to even begin to discuss the various minutiae with these people what would be required, what are ‘marginal costs,’ and how they should consider making various economic choices based upon various forms of data. Hell, even include the person that is a close relative who is likely in charge of making decisions or assisting their elderly relative with critical decisions.

    If you don’t think this would be an absolute disaster for a lot of elderly people, I would be curious to see what place you went where the elderly population was able to digest this easy, understand it, and be able to act upon it.

    • Nate Ogden says:

      “they should be solely responsible for choosing the recommended services they need. ”

      They are now! Choosing your Gap plan or MA alternative plus your Part D provider is already their responsibility, this system has worked for decades with gap plans. Where do you see the problem?

      I sit with seniors to discuss insurance plans all the time and have spoken to thousands over 10 year periods administering medical supp plans.

      • MG says:

        Understand what you are saying Nate but handing a senior a voucher/tax credit and asking them to choose all of their medical services they might outright including any acute, ambulatory, etc is a different ball game.

        • Nate Ogden says:

          I would disagree, as somone that has sold both it is less complex to sell a full blown medical plan then it is to go through all the Medicare options. Your trying to choose between multiple concepts then align multiple parts.

  12. Barry Carol says:

    Perhaps there could be a reasonable default choice for those who are unwilling or unable to make a selection.

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