Accountable Care Organizations as Private Practice Killers

Writing in the New York Post today, Scott Gottlieb, MD, a physician and American Enterprise Institute resident fellow, says Accountable Care Organizations may kill private practice. Doctor Gottlieb is a partner in a firm that invests in health-care companies.

Gottlieb's reasoning is that the new reform law encourages doctors to leave their private offices to become salaried hospital employees. This makes it easier for government to regulate and manage doctors. The idea is to encourage doctors and hospitals to share financial savings to better coordinate care and reduce their use of costly medical services by giving them a lump sum to manage a group of patients.

In many ways, the ACO concept builds on the 1990s approach to "capitation," which the public and doctors roundly rejected, and in which health-maintenance organizations gave doctors a lump sum to care for a defined group of patients.

This “vertical integration” will force doctors to become employees of hospitals and health plans. These changes are underway. According to a recent survey of health executives, 74 percent said their hospitals or health systems plan to employ more physicians over the next 3 years, and 61 percent plan to acquire medical groups.

The doctor-recruitment firm Merritt Hawkins said that 45 percent of physician job searches last year were for direct employment of a doctor by a hospital, up from 23 percent in 2005.

In 2005, two-thirds of medical practices were doctor-owned. By next year, the share of practices owned by physicians will drop below 40 percent, according to data from the Medical Group Management Association. Hospitals or health plans will own the balance of doctor practices.

One can argue whether hospital or health plan employment of doctors is a good or bad thing.

I am dubious because it stripes doctors of the ability to make “independent decisions,” based on what is good for the patient versus what is good for the hospital.

Secondly, ACOs are really capitation re-visited, a return to rigid managed care, a concept the American public roundly rejected in the 1990s.

Also it is well known that hospital fees are much higher than those charged by independent doctors in outpatient settings and in their offices. I do not think ACOs will lower costs.

Furthermore, accountable care organizations, by definition, will be large organizations, and can negotiate higher fees because of their market leverage.

Finally, accountable care organizations are bureaucratic centralized entities, while most market trends and disruptive innovations favor decentralization.