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Accountable Care Organizations: Additional Barriers To Success

Accountable Care Organization(ACOs) are not going to decrease the waste in the healthcare system. Waste occurs because of:

1. Excessive administrative service expenses by the healthcare insurance industry which provides administrative services for private insurance and Medicare and Medicaid. A committee is writing the final regulations covering Medical Loss ratios for President Obama’s healthcare reform act. The preliminary regulations are far from curative

2. A lack of patient responsibility in preventing the onset of chronic disease. The obesity epidemic is an example.

3. A lack of patient education in preventing the onset of complications of chronic diseases. Effective systems of chronic disease self- management must be developed.

4. The use of defensive medicine resulting in overtesting. Defensive medicine can be reduced by effective malpractice reform.

A system of incentives for patients and physicians must be developed to solve these causes of waste. A system of payments must also be developed to marginalize the excessive waste by the healthcare insurance industry. Patients must have control of their own healthcare dollars.

By developing ACOs, President Obama is increasing the complexity of the healthcare system. It will result in commoditizing medical care, provide incentives for rationing medical care, decrease access to care, and opening up avenues for future abuse.

The list of barriers to ACOs’ success is long and difficult to follow.

1. The government would rather deal with a few hospital systems than with individual physicians. Hospital systems would receive a lump sum payment for the care of attributed patients. The hospital system would control the money. Physicians would fight with hospital systems for equitable distribution of funds.

The idea has multiple problems. Most physicians in practice do not trust their hospital system. In the past physicians who became employed by hospital systems became disenchanted with the relationship. The hospital systems overloaded the expenses to the benefit of the hospital systems. The result was multi- million dollar salaries to hospital administrators and decreasing physician salaries.

It will be hard to get all physicians to be employed by hospital systems.

2. The Dartmouth group’s results are based on claims data. Claims data is notoriously inaccurate. Government policy decisions using claims data will lead to policy mistakes.

3. ACO patients are attributed to an ACO on the basis of their pattern of services used. Patients see a primary care physician who belongs to that ACO. All that patient’s care and expenses are attributed to that ACO’s lump sum payment.

If the costs incurred by the ACO’s “attributees” are sufficiently below Medicare’s spending projections for that population, the ACO shares in the savings realized by Medicare; if the costs are too high, the ACO loses nothing.

This represents a shift in incentives. The ACO, run by the hospital system, would want employed physicians to do less for the patients to earn more money. The result would be decreased access to care. Physicians have to be incentivized to do the right thing.

4. A problem will be the selection of attributed patients. There is no risk weighting of patients’ disease burden. Some patients are at greater risk of disease and its complication.

If one ACO gets sicker patients than another ACO that ACO’s chances of making money are less than the second ACO. Risk weighting of patients and their diseases is complicated but essential.

If a patient with the same coded illness as another patient does not follow instructions his chances of having complications from a disease are higher and his cost of care more expensive than another patient that follows instructions.

Attribution of the cost of medical care will be further complicated by the need to consider reasonable patterns of patient visits.

The nature of the attribution rules will have enormous implications to ACOs’ medical management.

5. Hospital systems that salary physicians receive fixed payments for diagnosis-related groups under Part B (physician payment for Medicare). Medicare also reimburses hospital based physicians for part of the costs of very expensive cases.

ACOs will be held fully accountable for outlier patients. Hospital systems will be hesitant to take on this uncontrollable risk. Accountability for costs under Medicare Parts A and B look like they are becoming daunting. After hospital systems realize the challenges of ACOs few hospital systems will choose to become an ACO.

(N Engl J Med 2010; 363:1389-1391, October 7, 2010)

6. President Obama’s healthcare reform law directs ACOs to be permeable to all patients. At the same time, they are held accountable for services by their patients obtain from outside providers. The financial risk is shifted from the government to the ACO. Once this is fully understood hospital systems and medical groups will not be willing to participate.

President Obama’s ACOs are creating a level of complexity that will make the healthcare system’s problems worse than they are now.

*This blog post was originally published at Repairing the Healthcare System*

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