OP-ED

Trying Too Hard to Save Medicare

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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Barry CarolMGRobert Su, Pharm.B., M.D.Matthew HoltNate Ogden Recent comment authors
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Barry Carol
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Barry Carol

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

MG
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MG

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… Read more »

Nate Ogden
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Nate Ogden

“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
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MG

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
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Nate Ogden

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.

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

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… Read more »

Matthew Holt
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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… Read more »

Nate Ogden
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Nate Ogden

“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… Read more »

Margalit Gur-Arie
Guest

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

MG
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MG

“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… Read more »

Nate Ogden
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Nate Ogden

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… Read more »

MG
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MG

It was a bit jumbled and sorry for that.

Here is a link to the GRIPA 2010 report:

http://gripa.org/Documents/Publications/2010%20Value%20Report.pdf

Here is a link to the FTC ruling in 2007 permitting them to be a clinically-integrated group;

http://www.ftc.gov/opa/2007/09/clinicalintegration.shtm

It wouldn’t need to be a self-funded employer but they would be the ideal candidate to take this on & due to their likely size they are already likely self-insured.

Margalit Gur-Arie
Guest

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
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Nate Ogden

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?

tim
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tim

“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… Read more »

Margalit Gur-Arie
Guest

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
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Nate Ogden

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
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steve

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… Read more »

BobbyG
Guest

What is the proper moral purpose of markets?

steve
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steve

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

kenmandellMD
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kenmandellMD

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.

Deron
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Deron

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.

nmimi
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nmimi

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… Read more »

Eric Tremont
Guest
Eric Tremont

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.

Margalit Gur-Arie
Guest

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.

Craig "Quack" Vickstrom, M.D.
Guest
Craig "Quack" Vickstrom, M.D.

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!”

steve
Guest
steve

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… Read more »

Nate Ogden
Guest
Nate Ogden

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
Guest
steve

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