Hospital Networks Reject Obamacare Initiative

Nine major hospital networks just decided they’d had enough of being “Pioneers” for ObamaCare.

They withdrew from the health reform law’s Pioneer Accountable Care Organization (ACO) initiative, which launched in January 2012 with 32 health systems participating.

These ACOs are supposed to integrate doctors, hospitals and other providers into one seamless network that could “coordinate” care for Medicare patients — and in so doing, eliminate waste and control costs.

But as these nine casualties illustrate, ACOs are going to fail in that mission. Worse, they’ll diminish the quality of care that Medicare patients receive.

Nationwide, about 425 private and public ACOs are in operation. These groups have agreed to a new government payment structure that essentially offers bonuses if they keep costs down while still meeting quality-of-care benchmarks.

If the provider groups save money, relative to the Medicare status quo, they can share in the savings with the government. But if they fail to keep costs down, in most cases, their risk of losing money is limited.

The 32 “Pioneer” ACOs can keep a greater share of any savings they generate — but also take on more downside risk. After two full years, successful Pioneers can leave the conventional structure, whereby providers bill Medicare for every procedure they perform, and instead take a flat fee per patient.

The exit of the nine provider groups “really shows a critical cost-containment approach in the Affordable Care Act is running into real problems,” according to Harvard health policy professor Robert Blendon.

The Pioneer program was intended to emulate health care systems like the Cleveland Clinic in Ohio, the Mayo Clinic in Minnesota, Utah’s Intermountain Health, and Pennsylvania’s Geisinger Health System. All have been celebrated for streamlining administrative procedures, efficiently coordinating care among the health providers in their networks, and lowering costs.

But their success is largely the result of their unique business and medical cultures. None of them provides an easy template for creating a national network of ACOs.

Tellingly, these same organizations have refused to become ACOs. In a 2011 letter, the Cleveland Clinic explained its decision not to participate by citing “significant administrative burdens” and noting the law’s regulatory red-tape had “little to do with outcomes.” The Mayo Clinic and Geisinger made similar arguments.

Health systems have cooled to the ACO concept in part because the federal government is six months behind in providing them the Medicare claims data they need to comply with the rules.

Providers are also concerned about the risks they have to assume to participate. If they don’t realize the “savings” that regulators demand, they’ll have to just take the loss — regardless of how much time, effort, or expense it takes to treat someone.

The intent is to force ACOs to be more efficient. But this setup gives providers substantial incentives to skimp on medical care.

ACOs could also face new legal liabilities. Last month, the Journal of the American Medical Association (JAMA) published a paper by Harvard professors H. Benjamin Harvey and I. Glenn Cohen warning that patients could potentially sue entire ACOs for medical malpractice by claiming that their “actions or policies prioritized cost savings over patient safety.”

Harvey and Cohen also raised the possibility of a “class action suit … against institutional policies felt to be potentially harmful to patients, such as physician incentives payments” for keeping costs down.

If they’re right, then any savings an ACO generates could be eaten up by legal settlements.

The two professors suggest that ACO doctors adhere to “evidence-based medicine” protocols, following the same treatment plan for every similarly situated patient, in order to immunize themselves against lawsuits.

But medical opinions vary widely depending on the patient and circumstances.

For instance, the medical community has debated when to give women mammograms for well over a decade now.

Further, what works well for one patient might not for another. Doctors need to be free to offer personalized treatment rather than worry about whether Medicare will pay for a procedure that isn’t part of the standard protocol — or whether they’ll be reprimanded for deviating from the norm.

For all this disruption, ACOs are forecast to deliver savings of just $4.9 billion through 2019. That’s equivalent to less than 1% of Medicare spending.

Patients should hope that these nine hospital groups are harbingers of many more to reject ObamaCare’s ACOs.

• Pipes is president, CEO and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is “The Cure for ObamaCare” (Encounter 2013).

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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