Sunday, February 13, 2011

Note to Federal Government: Beware of What You Wish for in Health Reform

The Obama administration has a tiger by the tail. The tail is a concept called the Accountable Care Organization (ACO). The tiger is the health reform law, ironically dubbed the Patient Protection and Affordability Act (PPACA).

The problem is the tail may soon be wagging the tiger. The ACO may raise costs for the PPACA, thereby defeating the original purpose of reform – to protect patients and to make costs affordable.

The goal of the ACO is to save money on defined populations of Medicare patients. Theoretically, doctors and hospitals would collaborate, save federal dollars, and then share the savings. Theory say this will happen because these two partners would deliver cost-effective, coordinated, budgeted care based on measurable better outcomes, higher quality, and lower costs per patient and per given Medicare population.

So much for theory.

What is happening in the real world is that hospitals and doctors, sensing what is to come, are rushing to set up collaborative ACO models. Doctors are rapidly becoming hospital employees, hospitals are hastily merging, big hospital-based organizations are growing bigger every day. In many instances, these new entities , particularly in small and medium-sized markets, will monopolize care, now having the wherewithal to negotiate higher costs and to stifle competition.

It is not unlawful to gain control of a market. What is unlawful is to exploit that control. The threat of ACOs monopolizing markets and setting prices has set up a looming war between the Federal Trade Commission (FTC) and the Justice Department. The Justice Department’s goals are to protect consumers by promoting competition and curbing monopolies.

In many ways, this conflict of reform interests was predictable. It takes a large organization to gain access to capital which finances growth; to have effective mechanisms for dealing with bureaucratic phenomena; to possess the true skills of management – marketing products, negotiating favorable contracts, organizing complex technology, maximizing talents of specialists, and bringing together different people from different professions to deliver service as a team. Bigger organizations are what the government wishes for. Big organizations are easier to control, or so it is believed by government.

In any event, large integrated, collaborative organizations of physicians and hospitals are likely to dominate the health care landscape. A concentration and consolidation of power will occur. For want of a better name, let us call these new organizations Mega-Accountable Care Organizations.

If you are a health care consumer, the question arises: Accountable to whom? Who do you trust: the government, or members of the ACO? As for government, it will have to ride the tiger until told by the Supreme Court to dismount.

Richard L. Reece, MD, blogs a Medinnovation and has a website under constuction. He is the author of three recent books, Obama, Doctors, and Health Reform (Iuniverse, 2009), Innovation Driven Health Care (Jones and Bartlett, 2007), and an E-book, Pros and Cons of Accountable Care Organizations (Practice Support Resources, 2011). He works with but does not speak for The Physicians Foundation, a 501C3 organization representing physicians in state medical societies. Opinions expressed in his blogs are his alone. He can be reached at

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