• When they get excited, I get nervous – ctd.

    Austin reminds me that he had a response to my concerns last week as well (I was on vacation!):

    The question is, once ACOs are in place (if and when that occurs), can the structure be used to gradually squeeze inefficiencies from the system. That’s the hope. That’s the goal. That’s the only way provider payment reform can work, politically, if at all.

    I often put it this way, you have to start with sensible structures that have no teeth. Then you have to add small teeth, baby teeth. Later you add some bigger teeth, maybe some canines. Finally, years from now, the fangs come out. But, they are only fangs relative to the health system of today. By the time we see the fangs, we’re ready for them. The transition is gradual. Everybody is on board.

    I hear that. But my concern is that the only time you can really get a stick in, politically, is when it’s accompanied by a carrot. There’s no way a measure with only downside will get implemented later in some easy fashion. So if we start all all-carrot now, what will we add later?

    Moreover, let’s face it. The groups representing doctors do very, very well when it comes to lobbying. When was the last time the sustainable growth rate really kicked in? Both sides react to almost any cuts to spending in health care spending with cries of doctors abandoning the field, doctors not being able to make ends meet, doctors forced to retire because the laws are so harsh. And that’s without sticks!

    We’ve encouraging doctor consolidation now, we’re providing only incentives now, we’re even making them better now. All against the promise that we will try and make groups share some of the risk later. Maybe. Hopefully.

    I’m just pessimistic that we’re setting ourselves up for failure.

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    • An ACO is a type of integrated delivery system. A few years back, I investigated the literature and came to the conclusion that little empirical evidence, if any, finds that IDSs are associated with cost-savings or quality improvements, probably because high-powered incentives (risk and reward incentives) are often diminished through vertical integration. (I believe Mark Pauly had a article on that topic in Health Affairs.) In fact, the late 1980s and early 1990s witnessed a wave of integration and then disintegration of health care organizations. Put another way, if ACOs are efficient, why hasn’t more of them been developed in the marketplace without government encouragement.

    • Aaron,

      Sorry about that. According to David Dranove, the FTC sees it differently so there still may be hope. See:

    • Working on an ACO right now for a client and so far, only real value creation projected is from consolidation (i.e., squeezing more out of payors) as the savings from clinical care changes themselves haven’t really materialized.

      Our working hypoithesis for why the savings haven’t come is that the variability in results with small ACO’s is responsible but the first poster’s comment seems possible as well…Either way, if the ACO’s become larger and more integrated, the easiest route for value creation is to collude and set higher prices for private payors…