Last week I attended a conference on health policy at the University of Chicago, where I moderated a panel that examined implementation of the Affordable Care Act. For much of our time, the panel focused on Accountable Care Organizations. Panelists and attendees wondered whether ACOs would meet the same fate as Integrated Delivery Systems of the 1990s. Some in the audience mentioned that when it comes to integration, electronic medical records could be a game changer. EMRs could be used to monitor and reward cost saving decision making, for example. But most ACOs are still figuring out how to use EMRs for clinical decision making; their use in helping managerial decision making remains far off.

As more and more speakers expressed skepticism about the future of ACOs, a physician in the audience offered a truly fresh perspective, one that makes me feel much more optimistic. I never learned this physician’s name, so I will call him Dr. Yes. Before I summarize Dr. Yes’ argument, it is helpful to turn back the clock to the late 1990s, when IDSs were taking the health industry by storm. Perhaps the defining feature of IDSs in the 1990s was the integration of hospitals and primary care physician practices. This strategy failed in large part due to classic agency problems. In a nutshell, an agency relationship can fail because of incentive problems (the principal is unable to effectively motivate the agent) or selection problems (the principal employs the wrong type of agent.) IDSs suffered both. When hospitals acquired physician practices, they converted entrepreneurs into employees who resisted any kind of incentive payments. As employees, primary care physicians did not work as hard or show as much commitment to their practices. Moreover, those physicians most eager to give up their autonomy were those looking to dial down their practices and lead the “quiet life.” In these ways, IDSs experienced both incentive and selection problems, with devastating results.

According to Dr. Yes, today’s physician is totally different from the physician of the 1990s. And those differences bode well for ACOs. Without mincing words, he said that today’s physician is fed up with private practice. Physicians face uncertain Medicare reimbursements and enormous pricing pressures from private insurers. They are told that they have to demonstrate quality but lack the data systems to do so. Solo and small group practices are virtually nonexistent so most physicians are already parts of large organizations. And patients with large deductibles are turning the physician/patient relationship into a business relationship. Dr. Yes might have added that the majority of new physicians have vastly different expectations about lifestyles and incomes than the previous generation. In the 1990s, medicine was being transformed into a business. Today, it is a business.

As ACOs acquire physician practices, they will find many willing partners, not just the self-selected few that are one step removed from early retirement. As employees, today’s physicians will expect pay for performance bonuses and welcome the opportunity to craft P4P schemes with their employers, rather than accept those imposed by insurers. If Dr. Yes is correct, today’s physicians will want to make ACOs work; they are ready for the business challenge. This stands in stark contrast to the many physicians who joined IDSs in the 1990s seemingly as a way to avoid work.

The ACO train has left the station and there seems to be no stopping it. For all of our sakes, I hope that Dr. Yes is right. Right or wrong, it does appear that a new generation of physicians will be key to ACO success.

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.” This post first appeared at Code Red.

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8 Responses for “Dr. Yes”

  1. I know electronic filing of records is the future. It will streamline the managing of files and paperwork. If doctors have a huge patient base, they become concierge doctors. No insurance, patients pay for unlimited access to the doctor. Smart doctors keep a PA that still accepts insurance. The doctor’s patients decrease by half or 2/3rds. The best line you wrote was about doctors not accepting what insurance companies offer, and the doctors make their own rules. If only we could do this in pharmacy, we could be highly regarded healthcare professionals.

  2. Jeff Goldsmith says:

    David is onto something. True enough, the Gen Y docs don’t have the same entrepreneurial energy as the boomer docs they are replacing. They may not want to work the hours their boomer elders did, or bill as much. However, they practice a MUCH more expensive kind of medicine, which bodes poorly for ACO’s. They were trained by clinical faculty to be completely oblivious to resource consumption, and have carried that unfortunate practice style into their new employment settings.

    The Gen Y’ers are consult-happy and CT scan happy, prone to underestimate their own diagnostic judgment. This is why the hospitalist thing isn’t working out so well for hospitals. Perhaps they will be less resistant to the emergence of resource sensitive clinical protocols but that isn’t happening yet in very many places.

    And hospitals are getting KILLED economically by employing a lot of them, under fee-for-service models because of the agency problem David mentioned. MGMA estimated losses of $212k per doc in 2010 for hospital employed docs, not counting their ancillary referrals. And every one of those $3500 hospital CT scans is like a fat Crispy Kreme cruller for the ACO diet.

    Decent sized hospital systems are burning $45-60 million a year on their new “groups”- which are really federations of pop-stands, rather than functioning group practices. The bleeding is arterial enough that many hospital systems will cut their losses long before we get definitive word on whether these new docs work out in semi-risk models like the ACO. They sure won’t be welcome in full-risk settings.

    It actually isn’t going to work out the way Dr. Yes thinks it will.

  3. Legacy Flyer says:

    ACO = HMO (Intergrated Delivery System) + EMR

    Everything else is wishful thinking.

    And Jeff Goldsmith is right, younger docs order more high tech, questionably indicated studies that older docs. NP and Physicians Assistants are even worse.

    Expect to see more across the board cuts in reimbursement. The Feds know no other way.

    • Jeff Goldsmith says:

      ACO is managed care “lite”, as most of them do not take downside risk.
      You do need a robust IT platform to assume downside risk, as HMO’s did, but a lot of ACO’s are attempting to skim the cream w/ care coordinators, etc. and haven’t/cannot fully wired their docs. Besides, at least the Medicare ACO’s use statistically attributed, rather than real, patients, so it’s not clear who you’re taking care of.

      Train has left station, and making of lot of steam and noise. Not clear that it clears the hill or reaches the next station. This idea was designed as a starter drug to get providers into the risk business, but what it’s really doing is enabling wealthy hospitals to snarf up their physician communities and consolidate their regional monopolies. It’s a huge consulting franchise that will produce a lot of embarrassing failures on the cost front, and leave behind a legacy of much higher costs.

  4. Dr. Mike says:

    You do know that if today’s physicians succeed with the ACO model tomorrow’s physicians will be paid less and less as time passes because the “savings” begins to disappear as what you are actually doing progresses towards what it is possible to do within the confines of the third party system. Of course y’all know this, and approve of it. It is ironic that just as a truly innovative model of care is coming on the scene (direct pay practices) that promises significant decreases in cost and utilization, so to is the ACO model being pushed forward, and in order for it to succeed it may become necessary to make direct pay practices illegal, as it is very likely that participation with CMS and other insurers will become tied to licensure so that “access” is assured.

    • BobbyG says:

      I’d like to hear JD Kleinke respond to your assertions.

      “Direct pay” may be truly “innovative.” Whether it will have economic legs is entirely another matter. I’m not dismissing your position out of hand, either.

      Legacy Flyer’s take (above) is a concern I share.

  5. Rajesh says:

    “ACO = HMO (Intergrated Delivery System) + EMR”

    where EMR = 0, at least with regard to the clinical and managerial decision-making support that are pertinent here.

  6. Kingsley says:

    Nice article, i really enjoyed reading this post. thanks for sharing

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