On Being Politically Incorrect and Realistically Correct about Accountable Care Organizations

I hate to be a spoilsport or to be politically incorrect. But I do like to be realistically correct. That said, I am dubious about the prospects of success for accountable care organizations (ACOs).

ACOs, its proponents claim, through internal payment arrangements between hospitals and doctors, will provide better, more coordinated, higher quality, measured care and will culminate in savings that can be shared by hospitals and doctors.

This concept sounds good, but as I write, ACOs only exist in the minds of reform theorists, and much needs to be done to make them a reality.

From my point of view, ACOs may represent a “pie-in-the sky” approach fraught with political and practical obstacles.

The problem, as I see it, lies in the assumptions about ACOs?

• A first assumption is that high costs stem from fee-for-service payments. These payments encourage doctors and hospitals do more. The underlying assumption here is that health care professionals can’t be trusted. What never seems to be taken into account is that the rest of civilized world works by fee-for-service payments and that the aging population and/or patients of lower economic status may require more intensive and costly interventions. Fee-for-service, in other words, may have little to do with higher costs.

• A second assumption is that costs will be lower with ACOs. I am dubious about this. Indeed, it seems to me, the larger the organization, the more dominant it is likely to be in the market, and the more likely it is to negotiate and charge higher rates.

• A third assumption is that primary care physicians, united in a common cause, will drive lower costs. The odds against this are apparent. Hospitals are hiring more and more primary care doctors on salary, and salaried physicians are likely to be beholden to their employers, who will encourage them to refer business to the hospital, where costs are higher than in the outpatient arena.

• A fourth assumption is that you can use sophisticated databases to control the economic behavior of hospitals and their medical staffs. In a lead article in the October 7 NEJM, “Becoming Accountable – Opportunities and Obstacles for ACOs,” Harold Luft, PhD,of the Palo Alto Medical Foundation, expresses doubts that ACOs will be able to handle or anticipate costs from “outside use “ - patients who vacation in Florida, end of life care, drug formulary use, lack of integrated records linking physicians, health plans, and hospitals outside (and inside ACOs)

• Finally there is the assumption that “experts” believe enough ACOs demonstration projects across the country will succeed to save Medicare significant money. The health care landscape is littered with failed demonstration projects. In a second Oct. 7 NEJM “Creating Accountable Care Organizations,” three experts – Gail Wilensky, PhD. health care economist; Elliott Fisher, MD, professor of medicine at Dartmouth Medical School and coiner of term Accountable Care Organizations; and Larry Casalino, M.D., chair of the division of outcomes and effectiveness research at Cornell, discuss the problems of ACOs. Dr. Fisher expresses great hope for success for five pilots he is engaged in, but says it’s too early to tell. Wilensky is dubious, saying hospitals may be capable of creating ACOs but most physicians are not. She foresees a “bad imbalance” between physician groups and hospitals. Casalino fears that ACOs will not succeed in the face of physician opposition. He believes most ACOs will be dominated by hospitals with physicians are employees. And what is to be done with the specialists, who may not be willing participants in ACOs? A lot of these concerns are unanswerable at present and remind us that the ACO movement remains in its infancy. Changing the cultures of hospitals and doctors to fit the ACO concept will not be easy.