Much has been written about the Affordable Care Act (ACA) and one of its ongoing experiments is known as Accountable Care Organizations (ACOs). Recently The Wall Street Journal published an opinion with the headline “The Coming Failure of ‘Accountable Care’”. While I agree with the authors that many ACOs will fail, I believe that they will fail for different reasons.
I have two different perspectives on this. One is based on 30 years of experience as an emergency physician in clinical practice, remembering the early days of managed care when HMOs were created to do much of what is expected from ACOs. A second perspective is as the CEO of a physician management company with almost 100 client hospitals. I believe that physicians and hospitals will indeed change their behaviors, and rapidly, once the ACA takes effect and they get paid based on value and not for the number of billable services provided. Otherwise, they simply won’t be able to compete with physicians and hospitals which are more efficient and provide better quality at a lower cost.
We have to remember something Nate Kaufman has pointed out about the ACA: “There is no new money, only consequences.” What we know is that physicians and hospitals will be paid less to do more, and a tide of consolidations will wash over the healthcare industry making the solo hospital or solo physician practice less likely to survive. But we also know that the impact of the ACA won’t be distributed evenly on a geographic basis as provisions take effect, meaning that fee for service will likely remain a viable option for some hospitals and physicians for years to come. Physicians who cannot or will not change their behavior where ACOs are the dominant healthcare delivery model, can seek refuge to practice in places where time stands still. This could be at free clinics supported by various charities, or they could join concierge physician practices where well-to-do patients can pay cash to satisfy either the physician or the patient’s need for sometimes unnecessary tests and services. The unwillingness to change past behavioral practice patterns in this small group of physicians will therefore not significantly impact the ACOs, which will rapidly separate from such providers if they can identify them.
On the subject of patient behavior, I agree that ACOs are unlikely to change entrenched habits and values, despite their efforts to do so. But I don’t think that changing patient behavior is the only key to significant healthcare savings. Even if we can’t stop people from smoking, killing each other with guns, or eating excessive amounts of fast food, we can do what the smart managed care entities of today do: manage outliers. It is well known that in some managed care plans as few as 5% of the patients can generate as much as 50% of the total healthcare cost. If we put our efforts into managing that 5%, we can reduce costs to the healthcare system.
As to the issue of cost savings, the government has inserted a “kill switch” on cost escalation. If costs are not reduced in its initial “market based approach,” it will simply cut benefits and/or pay physicians and hospitals less money for taking care of more patients. Thus the cost saving targets can still be reached if Congress and the President have the political will to cut reimbursement to healthcare providers. Physician behavior will simply be to follow the money. ACOs may or may not work, but regardless of whether they are able to create savings, the ACA is positioned to provide the regulatory and legislative means to reduce the overall costs per beneficiary and bend the cost curve.
While attempting to predict their respective effect on healthcare, it is important to draw a distinction between the ACA and ACOs. The ACA is landmark legislation with an impact that will play out over many years. It creates incentives for institutions along the continuum of care to cooperate more effectively in diagnosing, testing, treating and providing follow up care. ACOs are going to potentially cause a rapid sea of change in healthcare and physician behavior, and they have the potential to succeed and generate significant profits. However, the ACA does not mandate the use of Accountable Care Organizations, in my opinion.
Once again, I do agree with the authors that some ACOs will fail. But ACOs are just one of many pilot programs sanctioned by the ACA as experiments in population health management, and, as in any series of economic experiments, some failure is expected. It is frequently claimed that Winston Churchill once said “democracy is the worst form of government, except for all the others.” Perhaps one day Churchill’s quote might apply to our healthcare system as well. In 25 years the ACA will have been modified learning from the failed experiments of today, but it could still be the worst form of healthcare for the United States, except for all the others.