ACOs: An Old Idea in Healthcare with A New Name

The old saying, “what goes around, comes around” seems especially true in healthcare today. For those who have been in medicine for a few years, many of today’s new healthcare models sound surprisingly like the old risk-bearing payer models of the 90s.

• Capitated payments to the delivery system
• Promotion of vertically integrated delivery or staff models for “efficiency”
• Making the delivery system the “sheriff” of utilization
• Sharing the savings - if they even exist - with the delivery system

Sound familiar? It should. These types of programs were promoted in managed care in the 90s and all are once again part of the emerging healthcare systems of today.

In fact, the Affordable Care Act calls for the creation of accountable care organizations (ACOs) that will once again take on the risk of increased healthcare cost. This is reminiscent of the programs that included full risk contracts of the 90s, the “withhold payment” systems, and the IPA risk contracts of today. What was learned by moving the cost to the delivery system?

1. That it can only work if there is real utilization management.
2. Large vertical systems make it easier to make the tough decisions and enforcement of policies.
3. Using economic incentives to change the habits of independent providers of care requires more economic incentive than the existing incentive for overutilization.
4. Large delivery systems have to squeeze out even more “delivery” to cover the costs of management, administration and profit.

So, the only way to control the delivery system and keep it somewhat independent is to incentivize larger and larger entities that can more strictly manage utilization and costs. More of the decision making must go to business people (sometimes physician business people) and away from those who care for the patient. This can lead to a lower level of care for patients and the lessening of critical decision-making on the part of the individual physician.

Government recognizes that it is not a very good manager of utilization. It either has to improve its management and take the political heat for many decisions or offload that process to companies and individuals. Profit-driven (and many not-for-profit) businesses make decisions that focus on cost and often have to cut services and reimbursements. Patients who pay out-of-pocket in part or whole for their healthcare are often the best utilization managers. However, there are many who need subsidies to access even the most basic care.

So, here we go again with the ACO. First, it might “die on the vine” with the Supreme Court decision on the legislation. Next, it may not attract enough participation as there still is not enough of an economic incentive to do so. So, if it has the impact on healthcare that it is intended to, what happens to physicians who do not want to participate? They will become more and more independent and the demand for private care will continue to grow in the U.S. as it has in many other countries. The trick will be to do it in a way that allows for transitions that minimize risk.

So, what goes around, comes around.

What can help to align incentives and to ensure that delivery systems meet the needs of all participants - doctors, patients, payers, and taxpayers? I believe it’s the addition of a privately funded healthcare system, which provides needed revenue to the system, allows physicians to have choices in how they practice medicine, and gives patients options.

Full-model concierge medicine, hybrid concierge, direct pay, etc., are all models to help generate such choices, and have features that may work for some physicians but not for others.

The bottom line all physicians must grasp is that change is coming to our nation’s healthcare system. We can be swept up in the change or lead the way in ensuring there are options that work for physicians and patients. Find out about options available and ask yourself what you want and need. Consider your patients and your community as you decide. When we all work together and focus on systems that provide optimal care and align incentives, we’ll have a better chance of creating the healthcare system we all want and need.

Wayne Lipton has more than 35 years of experience in healthcare and business, including the past seven years as founder and managing partner of Concierge Choice Physicians LLC. He speaks regularly to physicians and physician groups and has conducted hundreds of seminars on full-model and hybrid concierge practices. E-mail him here.