• ACOs are not (necessarily) doomed to repeat the past

    Kevin Outterson is an associate professor of law at Boston Univerisity.

    Last week, I asked whether ACOs and 1990’s style Physician Practice Management (PPM) companies were separated at birth.

    PPMs like MedPartners and PhyCor tried to organize doctors into integrated delivery systems, with better HIT and professional management.  They accepted responsibility for coordinating patient care, in exchange for partial or global capitation.  It was a miserable failure.

    But that doesn’t mean that ACOs will fail.  Uwe Reinhardt wrote an article in 2000 titled: The Rise and Fall of Physician Practice Management Companies.  He didn’t doubt that PPMs chose worthy goals, but suggested that Wall Street’s obsession with accretive roll ups was to blame:

    [I]t is now generally agreed that its rapid recent rise and fall during the past decade was driven mainly by pyramidlike funny-money games.

    But Reinhardt wasn’t convinced that Wall Street had really tried to create modern physician organizations:

    The business model originally promised by the industry has been heralded in the early 1990s as a vehicle for endowing physicians with the financial capital they would need to harvest the synergism of larger groups; to build sophisticated clinical information systems that would help physicians to manage care more efficiently; and to develop as countervailing power against the growing market clout of the managed care industry.  The advertised idea was to create genuine value that could be shared at least by physicians and their capitalist allies in the financial markets, but perhaps also by patients, in the form of lower prices or higher quality of both.

    On paper, it is an attractive business strategy, and it might work in practice, if physicians were made partners rather than salaried employees, if the management fees charged the physicians were matched by valuable management services rendered them, and if the PPM company itself were built on a fully developed information infrastructure.  The question is whether Wall Street will be able to muster the patience to finance such a strategy and, if not, who might.

    So the question becomes, have we learned from our mistakes?

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