ACOs May Wobble But They Won’t Fall Down


Accountable Care Organizations (ACOs) are positioned to be health care’s new delivery platform. More an idea, an experiment, than a thing, they:

  1. Are legal entities that consist of physicians, hospital(s) and insurer(s);
  2. Have a core of primary care physicians;
  3. Must make a three year commitment to function together;
  4. Must care for 5,000 patients;
  5. Must be prepared to reduce overall health care expenditures and improve quality.

They are intended to be pro-competitive, but watching the early line-up of organizations positioning as early ACOs, most look more monopolistic than anything.  It’s a little like a child who planted little butterfly chrysalises, waited idealistically for the small winged things to emerge, then ran in horror when it was Pterodactyls, not butterflies, that swarmed.

The ACO concept is curious, yet hospital systems all over the country are busy preparing themselves to take the lead on ACO development.  Why?  Who else but hospital systems have the necessary ingredients of:  (a) time, (b) money, and (c) organizational expertise?

Physicians certainly don’t, but they are necessary players.  ACOs cannot function without physicians; and physicians must take a key role in ACO development without “joining.”  That is, they have to take active roles in the ACO development talks and not simply sign up.

The ACO concept is premised on some remarkably questionable assumptions. For example:

  • Physicians, hospitals and insurers can create the trust, collaboration and transparency necessary to be in business together.  That’s a little like hoping cats and dogs will one day roam the neighborhood paw in paw.  It’s not impossible, just funny to think about.
  • Primary care physicians can control ACO cost and quality.  The truth is that there is a primary care shortage all over the country; and the trend is towards a de-sophistication of primary care through the use of supervised “physician extenders,” such as PAs, MAs, nurses and nurse practitioners.
  • Physicians can manage other physicians.  For an ACO to reduce costs and improve quality, someone has to lead.  The Brookings Institute, for instance, has
    that neither hospitals or insurers are well suited to  accomplish either of the cost/quality objectives.  Will ACOs empower and reward physicians to lead the cost/quality objectives and will physicians accept the responsibility?  That would be remarkable.
  • ACOs are pro-competitive.  How can that be, when the main players lining up to lead the charge are the “big dogs” like Kaiser and Mayo?
  • ACOs will reduce costs because the participants will be paid on an incentive basis (to reward lower costs and higher quality).  Untested, unproven, perhaps even unlikely.  As an aside, how will physicians know their insurer partner in an ACO has achieved cost savings?  It’s a Koan, isn’t it, a riddle with no solution, like the sound of one hand clapping.
  • This is the end of fee for service medicine.  Though FFS medicine is viewed as the root of all evil for health care pundits, no one is suggesting there be a mad dash towards capitation (a per member/per month payment).  In fact, most think tankers believe shared cost savings is the first and logical wave of payment reform.  No down side at all!

What is clear about ACOs so far is that they are big business; and there is huge interest among hospital systems in preparing for a battle royale with other hospital systems.  As such, systems have never been more active in gobbling up practices and integrating for greater geographic coverage.  Medical practices too have “integration fever” and are ready to jump into nearly any mega practice arrangement that comes along.  Consultants with everything to sell from  “health care” to legal services are busy selling in an environment where the motto has quickly become “Do something! Anything!”

For many health care businesses (physicians, hospitals, etc.) the answer has been to spend money, lots of it.  How many  “excellent” $100,000 EMR systems sit burping uselessly in the offices of physicians who were told “You gotta do this to get the nearly $64K that awaits you (assuming 30% of your patients are Medicaid recipients).”  Plenty.  Oh, as an aside, remember that the incentive money has a planned five year pay-out and will likely be taxable.

Health care reform concepts are not new.  The 90’s brought a flood of fully capitated primary health care clinics and sub-capitated specialists.  Every entrepreneur had a “network” that skimmed off the top, then sold to some Wall Street guys.  None of this is new, but it is unique because it is (1) government mandated, and (2) linked to quality accountability (whatever that is).  And while it may be likely to change, it is unlikely to go away.

Slow down Stanley!  ACOs and the rest of health care reform’s measures are changing faster than anything.  The ACO concept itself is considering better alignment partners than originally considered.  “Maybe since physicians, hospitals and insurers don’t want to have lunch together, let alone be in business together, other alignments might work better,” some lawmakers and think tankers maintain.  And we will definitely see a lot of such rethinking in the next 10 years or so that reform is set to phase in!

So, what to do?  Listen, learn, carefully examine your personal and professional plans, then see what might fit you. One size does not fit all.  Is a mega practice the right thing for you?  Not if you’re gonna retire in a few years.  What about an IPA?  Sure, if the IPA is willing to break away from pure fee for services contracting.  What about going after the “proprietary market” with a concierge or VIP practice?  And what about solo practitioners?  Are they doomed?  Not likely.  In fact, as the insured market expands and care gets squeezed to its lowest common denominator, many think the proprietary market will expand faster than a Tempurpedic mattress.

ACOs, networks, MSOs, GPOs and the like are just part of the rich alphabet soup that physicians must drink from to play an active role at this time.  There is no way to avoid the change conversation, or to sit this one out!  Nor is jumping in a bad thing.

In fact, the dirty little secret of this era is that health care reform can be a little like chicken soup to physicians. Anything they do that lowers costs and improves quality is good, regardless of what you call it.

Jeff Cohen is Founder of The Florida Healthcare Law Firm, a board certified health care law specialist (and frustrated comedian).

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