Have We Found the Magic Acronym?

Sometimes, reality just delivers – this morning in the form of some funny Google search results.

Aghast at the fluidity of my acronymic spew in an email exchange with a colleague (“ACOs can be MSOs instead of PHOs because Stark now safe-harbors EMRs for IPAs, so the PPMs and hospitals can share IT to TPA the risk piece, and…”), I decide to brush up on these new-fangled entities in the health reform law called “ACOs,” or Accountable Care Organizations.

In case you’re still stuck back on page 689 of the law, the ACO is This Year’s Model – the TLA (Three Letter Acronym) with Big Mo.  An ACO is a contracting entity, codified in the health reform law, through which a group of physicians and a hospital or several hospitals work together to share in the financial risks and rewards associated with patient care.  Sound eerily familiar? To me, the concept sounds like a bad movie I once saw – a really long and dreary drama with nothing close to a Hollywood ending.  Or maybe it was a bad waking dream I had while dozing at a population risk management conference in 1998, thanks to a slight fever, two Sudafed, and half a bottle of Robitussin.  Or maybe it was something I read that same year.

Hospital and physician integration has become ‘thinkable’ now, if only because physicians and hospitals finally recognize that they will sink or swim together, thrown as they have been into the same turbulent, unforgiving waters of a self-correcting marketplace. As a reaction to the cost crises of the 1980s and early 1990s, government and private purchasers – directly and through MCOs [managed care organizations] – have blamed both hospitals’ and physicians’ self-serving clinical behaviors, inefficient practices, and excess capacity as the main driver of their own health care spending woes.  This is precisely why the purchasers turned the MCOs on them in the first place.  This is why MCOs have been positioned as the enemy of both types of providers.  And the enemy of my enemy is my friend, or so the thinking goes.

OMG, that was some big thinking! So the purpose of the 1998 vintage ACOs was to punch the MCOs (i.e., the 1998 vintage HMOs/EPOs/PPOs/POSPs/MOUSEs) in the nose. OK!  But more on this little artifact in a moment.

In the meanwhile, for those who do attend population risk management conferences, if only for the vast amounts of fattening foods, an “ACO” sounds a lot like a vehicle for the “integration” described above – or what we used to call COEs (late ‘90s), MSOs (mid ‘90s), and PHOs (late ‘80s).  (I am not sure what ACOs were called before then, as I was working mostly in CDBs, or College Dive Bars.) But this is precisely how ACOs read in the health reform law; are described, with dread, by my hospital executive friends; and are described, with commensurate relish, by my health care lawyer, data vendor, and consultant friends, especially the ones who know that the road to riches for bill-by-the-hour types is paved with the Find-and-Replace command.

An ACO by Any Other Acronym

So I sit down and Google “ACO.” And I expect that the first page of search results will list a few links to the health reform law and of course a cottage industry of consultants with a long history of planning, implementing and managing the nation’s ACOs.  LOL! The top search results – and I am not making this up – are all for the American Cornhole Organization. Go see for yourself.  http://www.americancornhole.org/ Yes, sometimes reality does deliver.

Ah, the cornhole game.  I’m not sure if the architects of health reform had this popular pastime in mind when they chose to ignore three prior generations of mostly failed acronyms for the same type of organization. But you would be hard-pressed to find a better metaphor for attempting to mend, one more time, the 100-year-old economic, legal, and cultural divide between most physicians and most hospitals than a game where you try to throw big beanbags through little holes at the other end of somebody’s backyard. While drinking.

While this year’s model may be called an ACO, what we really ought to call all of them is a PWA (Please Work Already!). This same idea about PWAs keeps re-surfacing because it’s not just a good idea – it is an idea we have needed desperately, since the emergence of modern medicine a century ago, when hospitals stopped being hospices, and our doctors admitted us there to get us better, not get us gone. How long and deep is this historic divide?  Look no further than the fact that we say “Medicare Part A versus Medicare Part B” without stopping to wonder why we talk about it like it’s a boxing match. Or the former BlueCross and BlueShield organizations, who figured out back in the 1970s how inefficient the divide was – perhaps because insurers actually are ACOs, accountable, if in a bit of a time-lapse photographic way, to their corporate, government, and retail customers.

The ACO, or this year’s PWA, is hope in technocratic re-packaging.  It is a symbol of our perennial, desperate attempt to align physician and hospital incentives, improve the quality of care, eliminate redundant and often harmful interventions, and reduce costs. Nirvana. Real reform. Imagine. Which is not overstating the case. Why? Because if the ACOs were actually implemented as planned, with the full force of Medicare reimbursement behind them and the commercial health plans following suit (as they often do with breakthroughs in Medicare payment methodologies) – then the ACOs would emerge as the most powerful change-agent in the health care reform law, perhaps the only element in the law with any chance of actually reforming health care, at the delivery system level.

And best of all, it’s not like we have to start from scratch. If you are keeping track at the office, Find-and-Replacers – you should know that the ACO as written in the legislation can be built upon the foundation, remnants or ruins of anything already in the ground: an MSO, a PHO, or any IPA, PPM or physician practice that joins contractually with a hospital or set of hospitals for the purpose of coordinating care and doing the right thing for both patients and payers. But will the ACOs – this latest incantation of the PWA – actually work?  Or will they follow most of their acronymic predecessors down the, uh, cornhole of history?

The Future Ain’t What It Used to Be

The question “will they work” is less about what an ACO actually is than what the BBW (Big Bad World) has recently become: less about whether integrated physician/hospital risk-sharing organizations are ready for prime-time than is prime-time ready for them? Will we figure out how to implement and run these PWAs – these new-old-fangled, long-awaited organizations – and bridge that century-old divide, even if most of their predecessors failed so miserably?

Or are we just partying like it’s 1999? The cynics among my colleagues (78.3%, though it’s self-reported data) say give up. Same story, different acronym, same ending.  Here’s why they’re wrong.

It has nothing to do with what we call the PWA.  It’s the BBW, and the BBW has changed – radically – from the one confronted by the earlier PWAs, back when everyone in health care and on Wall Street was indeed partying like it was 1999.  In today’s BBW, there is no music, the beer is gone, the lights and cameras are on, and it’s our house – not somebody’s rich parents – that we are trashing, if things do not work out.

Back in 1998, when I authored those heady words above about the strategic and economic inevitability of physician and hospital integration (in my book Bleeding Edge: The Business of Health Care in the Century), there were three significant differences between the BBW then and now.  And each of these differences is a make-or-break factor in the perennial PWA experiment. With few and notable exceptions, in 1998 there was no real reimbursement at stake; there were no portable (i.e., Web-tech-based) clinical and financial information systems to support the “integrated” (but still mostly virtual) organizations and their clinicians; and there was no real commitment from most physicians, who are the sine qua non of every single serious effort to reform health care delivery at its most fundamental level.

Absent real money, absent computers up to the task, and absent true physician buy-in, we nonetheless slapped those old PWAs together.  We gave lip-service to their strategic plans; mistook paint jobs for real process engineering; had limited or no access to clinical or financial data to support medical decision-making; and tried desperately to navigate around the financial escape hatches for physicians that opened with every PPM IPO. (I’ll explain that double TLA in a moment.)  With rare exceptions in portions of a small number of markets (e.g., Seattle, Boston, Minneapolis and Salt Lake City), the biggest payers were not changing the way they actually paid doctors. There were no readily portable clinical and financial information systems available to connect independent physicians with hospitals where they admitted their patients – and in fact, there were terrifying legal penalties for implementing anything of the kind, thanks to the unintended consequences of the dreaded “Stark” laws. And the cost of getting physicians to participate in any sort of risk-sharing organization – either directly through a PHO-type purchase of their practice by a hospital, or indirectly through MSO-type reimbursement sharing with their practice – was wildly inflated by a false currency that flooded the market in the mid to late 1990s.

That false currency was issued by yet another vintage ‘90s acronym, the PPM, or Physician Practice Management company.  Several raised huge war chests from Initial Public Offerings (IPOs) of stock, specifically to buy up physician practices that the managed care movement had put, inadvertently, into play.  Among the dozen or so national PPMs, the most notorious were PhyCor and MedPartners, publicly-traded companies burning Wall Street’s cash faster than their pre-Enron-fallout accounting tricks could print it. They were essentially Ponzi schemes that bought up early-mover physician practices at rates that eventually approached a million bucks per physician, with later-mover practices paid in stock that eventually collapsed.  Then everyone wondered why the early-mover physicians stopped working so hard, and why the late-mover physicians fled the new arrangements faster than they entered them.

As every undergraduate learns in Macro- and Microeconomics 101, money spent – even when it’s begged, borrowed or stolen from investors – has on the broader economy a multiplier effect, and on any asset market an inflationary effect. The false currency flushed through the provider community in the ‘90s by the PPM IPOs artificially bid up the price of all physician assets; forced hospitals into direct or indirect bidding wars when trying to corral physicians into the PWAs; and created completely unsustainable financial models for those PWAs trying, simultaneously, to radicalize care delivery, improve quality, and reduce costs. Worst of all, this false gold rush created commensurate expectations of quick and easy riches for physicians, many of whom made honest efforts to make the new organizations work – while many others did little to work with the hospitals and execute on those integration strategies.  Why should they?  They’d been cashed out.

But even the best-intentioned fell quickly into deep dismay over the disconnect between the vision of their PWA and the drearily unchanged reality of the BBW.  Many of those physicians – especially those in the positions where we would look for leadership – were flush with new money, and absolutely nothing else had changed. The primary tools supporting their PWA’s daily operations – the big, bold new integration of the physician’s practice with the hospital and the rest of the care system – were the pager, fax machine, and after-hours meeting.  So while trying to execute on those strategies and radically change their clinical behaviors around this brave new business idea, physicians still had access to little, no, or bad information. Someone told them a new day of technology, integration and teamwork was dawning, but they were still charting with crayons.

And then, at the end of that new day, the new reimbursement money never showed up.  Voila!  Nothing had changed.

The best acronym for those organizations, had it been invented yet, would not have been ACO, COE, PHO, or MSO – it would have been LOL.

That Was Then, This is Now

The “A” in ACO means “accountable”; and accountability for complex medical cases – and for a population of patients – is a team sport.  It requires true, profound, game-changing integration. And integrating care to improve outcomes and reduce costs means integrating information, people, and process. The rest – the easy stuff – is branding, office decoration, and drug rep donuts.

After a decade of screaming by enough health information technology experts of all political stripes, Congress in 2006 finally passed the Stark Safe Harbor legislation, giving hospitals the green light to connect their systems with the systems of physicians who admit and treat patients in their facilities. And the HIEs are coming – slowly, but surely, steadily coming – which will allow the integrating ACOs to integrate with the rest of the BBW. And then imagine: a health care delivery system with the efficiency, speed and flawlessness of the ATM system, where your new doctor can get your medication and allergies list, almost as fast as a casino can get every detail about your financial life for the past 30 years.  It is actually coming, only 25 years after someone first thought of building it around a smart card.  (Look for a future blog on that epic journey.)

Given the endless breakthroughs in technology, combined with the seeming miracle of political will to build HIEs and fund EMRs, and the ACOs have the very good fortune of being born into a BBW wholly unrecognizable to us, even ten short years ago.  EMRs no longer bear the scorn of most established physicians; rather, physicians who continue to practice medicine with paper charts and crayons are increasingly bearing the scorn of a society that, for the most part, had a computer installed at its first job. And of course, the $44,000 per physician sweetener, courtesy of the stimulus package’s EMR payment program, does not hurt either.

Because the bottom-line is, well, the bottom-line.  And if it takes cash to move physicians to computerize, then the ocean of cash going into play for the ACOs will be the clincher.  Since 1989, I have been listening to health plans, employer coalitions, large corporate HR departments, and demonstration project managers at CMS all claim that the antiquated FFS reimbursement system was changing.  Any day now.  Really.  And one by one, each of these purchaser/stakeholders looked around the conference room table at each other – no, you go first; no, you go first – and then, nothing.

The health reform law’s ACO reimbursement provisions – under which integrated physician/hospital groups are paid for outcomes rather than outputs – are not this year’s little dabblings at the edges of a few markets. Those provisions are not the latest in that other long, wearying parade of acronyms we’ve endured since the mid-‘90s: BTE, P4P, VBP, WTF.  As both the advocates and opponents of the health reform law love to crow, there are some enormous cuts in that law aimed at the Medicare budget; the only way we can pay for the bulk of them is by unleashing new-fangled physician/hospital reimbursement mechanisms on the new-fangled PWAs, i.e., the ACOs.

Oh, and the final and most interesting reason it is different now: physicians are not who they used to be either. The PWAs failed when they were foisted on a generation of mostly male physicians, all gagging on their first bitter taste of managed care.  The sudden intrusions of insurance companies into medicine was an aberration, an insult to the dignity of the profession, and it would surely go away when the public realized how corrupt it was.  Many of those physicians had gone into medicine to save the world, or to save themselves from the world, or to get rich. They could run their own practices because they were smarter than business people; organic chemistry and the MCAT, after all, were lots harder than accounting and the GMAT.  Oh, and only secretaries used computers, because you couldn’t fit one in the pocket of a lab coat.

That was then, and this is now; and my new doctor is as likely to be a woman, consult with me about a condition via email, and in her employment negotiations, care as much about her call schedule as the extra dollars she can make for “production,” classically defined as “producing more billable services.”

But the bottom line is the bottom line.  And for the most exquisite expression of why it really is different this time – of why the new acronyms really do signal a new era, and why we are not partying like it’s 1999 – you have to go back to yet another popular song from the 1980s: “Money changes everything.”


J.D. Kleinke is a medical economist, author, and health information industry pioneer.  He has been instrumental in the creation of four health care information organizations; served on several public and privately-held health care information company boards; and written about health care business policy for The Wall Street Journal.  His work has also appeared in JAMA, Barron’s, the British Medical Journal, Modern Healthcare, and numerous other publications.  His books include Bleeding Edge: The Business of Health Care in the New Century (1998), Oxymorons: The Myth of a U.S. Health Care System (2001), and Catching Babies, a novel about the training of OB/GYNs, which will be published in March.

13 replies »

  1. americancornhole.org/ ??? I had no idea it was a game (unless the competitors are incarcerated, which might be just the ticket for the corprate shills…just sayin’ )

  2. The answer to JD’s question is: Nope.
    Virtual patients, virtual care systems, managed care w/ no downside risk? Gin and tonic without the gin. The risk is precisely what compels providers to make tough choices about how much care is provided and for what price. No societal savings and a lot of collateral damage (more Sutters, more Partners, higher rates). The ACO is a stupid idea. If providers are serious about containing costs, let them start health plans or full risk contracting entities like IPAs and really be accountable.
    Agree w/ Margalit and MD as Hell. This is laetrile, not a cure, for higher medical costs.
    (Do oxymorons have anti-oxidants in them?)

  3. Ray Blum, whoever you are with those silly pop-music references, you must have grown up on Happy Days in the ’70s instead of That 70’s Show in the ’90s, if you think we’re that bereft of new ideas.
    Free your heel, and you’ll be partying like it’s 18-99…at least in Scandanavia, which recognized the failure of medicine as a market good around then.

  4. I’m with MD as HELL. It’s really nice to see that all those with “skin in the game” are finally aligning their interests. Those with other organs in “the game” are not really players anyway.

  5. Awesome post JD. What is the inspiration for ACOs? Does it rest in the perception that most physicians are guilty of overutilization? Is that we are providing unaccountable poor quality?