• The ACO love-fest (a must read)

    Some days just warrant a lot of posts. This is one of them. I’ll keep this one brief.

    I rarely declare things “must reads,” but the Kaiser Health News column by Michael L. Millenson is one of them. He does the best job of anyone I’ve ever read at concisely explaining ACOs and why they’re a popular idea. He’s right that they haven’t been strongly attacked by opponents of reform. They’re a good idea! But …

    Millenson misses just one thing. Concerns about ACOs have been raised by health economists, including me. The provider integration they encourage may make sense for public payment purposes, but at the risk of increased provider market power relative to insurers. That could lead to higher private prices. If that’s what happens, observers will call it a “cost shift.” But, like many prior examples of cost shifting in health care, it’ll be a market power story.

    No wonder providers like them. They’re not worried. Does that mean we should be?

    • I trust you saw the NEJM article on the Grand Junction model. Not exactly an ACO, but achieves some of the same ends. It does put a lot of market power into the hands of PCPs, but it seems to work for them. Kind of makes sense since specialty care is more of a driver of costs.


    • I think you missed his bigger point. The post has a foreboding tone.

      Without details, ACO’s in 2010 are everything to everbody–love and good cheer. Like the lovefest of yore (this is where you flash AHA, AMA, etc., at WH in ’09 proclaiming committments to a collective 1.5% bend in curve…I hear crickets), this realtionship will also enter therapists offfice

      I believe, and until I see real congressional or state level buy in, ACO’s will find limited success with large systems. Smaller units will adapt to systemic changes and evolve in a less conceptually pure way, ie, they wont read the textbook CMS is proffering currently.


    • ACOs are an updated version of gainsharing, moved out of the hospital. The primary legal challenges to gainsharing were: (1) Medicare CMP, which prohibited payments to reduce care (fearing underutilization, how quaint); (2) fraud & abuse (hospitals can’t have financial relationships with referral sources like doctors, unless an exception applies); and (3) exempt org tax (charitable hospitals can’t share earnings with private entities like docs). We didn’t worry so much about AT since most gainsharing models were non-exclusive.

    • ACOs, like the Medical Home, are a pretty Rorscach card. Patients see somebody who cares about them, doctors see more money, politicians see accountability. Everybody gets to call it reform. It’s really just a blot of ink. It won’t be real until somebody writes the quality indicators that we’ll use to judge them, the payment systems that will ensure access to treatment while reining in costs, and patients get a sense of the result. Grand Junction is a small town struggling to maintain a unique system that developed over decades from very specific circumstances. A small group has enormous power and has used it wisely. It’s a great model to study, but a tough one to mass produce.

    • Yes – ACOs will probably increase market power of providers relative to insurers. Is that a bad thing? At the moment, health insurers are oligopolists in most markets. This oligopolistic power distorts markets with largely ineffectively checks and balances on their power. ACOs offer an opportunity for the buyer (government and employers) to talk and work with those that provide the service. Healthcare is one of the few services that are almost completely intermediated preventing dialog between those that purchase the services (or at least pay the majority of the cost) and those that provide it.

      • @Jay – Search the blog. I’ve explained many times, with evidence, how increased market power leads to higher prices and premiums, and how high insurer market power can counteract that of hospitals. Or, don’t search and wait for me to explain it again. I will.