ACO’s: Now We’re Just Being Silly

By Jeffrey L. Cohen

By now, every physician has heard the term “Accountable Care Organization.” They have also heard the term “Irritable Bowel Syndrome,” which elicits similar response. We all know for instance ACOs are being proposed as the new healthcare delivery platform for the masses and that they are more an idea, an experiment, than they are a thing, the basic elements of which are:

  1. They are a legal entity which consists of physicians, hospital(s) and insurer(s);
  2. They have a core of primary care physicians;
  3. They must make a three year commitment to function together;
  4. They must care for 5,000 patients;
  5. They must be prepared to reduce overall healthcare expenditures and improve quality.

Now, the fun part.  Why are they silly?

A. They’re supposed to lower healthcare expenditures, but in fact they will clearly diminish competition, which can easily backfire by driving prices north.

Take a look at the early line-up of entities that are positioning themselves as early ACOs.  They’re all huge businesses (e.g. Kaiser, Cleveland Clinic, hospital systems) whose relationships with physicians mimic cosmological phenomena like black holes.  They whirl, they grow, physicians become absorbed by them.

It makes sense really.  The capital and managerial requirements alone for any organization charged with caring for 5,000 people (at a minimum) under a three year commitment with cost saving and quality outcomes requirements are huge!

Physicians have two jobs every day just caring for sick people and seeing if they made any money from day to day.  What little time they have left over, they like to engage in frivolous things like having a life!  The bottom line is that ACOs will prove to me the most anti competitive gift to big business in recent history!

B. Hospitals, which are driving ACO development in the old “command and control model,” have a clear conflict of interest.

Since cave man days, hospitals have always had the same way of making sure they are making money.  Walk around “the floor” and see people in bed in nightgowns with nothing on underneath.  ACOs are being driven by hospital systems because hospital systems can and physicians can’t.

Hospital systems have all the tools necessary to get the job done—access to capital, management, marketing, contracting departments, accounting (with actuarial capability), etc. Since the most expensive part of healthcare is found in hospitals (and also at the end of life), and since hospitals make profits based on bodies in beds, how is it that ACOs led by hospitals are equipped to reduce costs?

The concept proposed for ACOs is that they will be primary care centric, yet doing that will mean diminished involvement by specialists and a decline in hospital admissions, right?  How will hospital-led ACOs reduce costs if they make their money based on higher specialist involvement and patient admission? It’s reminiscent of the days when Humana was in the hospital business and also in the insurance business.  The Humana hospital vied for admissions while Humana insurance prayed that no one got sick or admitted.

C. Primary care cannot play the enhanced role envisioned by ACO theorists.

One of the core assumptions made by ACO architects is that spending more time and money on primary care will result in reduced costs and enhanced outcomes. That assumes (a) there are plenty of primary care physicians, and (b) they can handle the patients medically.  Yet we know (a) there is a well-recognized primary care shortage, (b) because of the shortage, the involvement of “physician-extenders” like nurses and PAs is growing fast, and (c) primary care medicine has become increasingly reliant on specialist involvement as medicine has become increasingly specialized. So the presumptions underlying the idea appear to be just plain wrong.

D. Patient accountability is virtually missing from any healthcare proposals.

Parents know one thing about raising kids: if you want a certain behavior, you gotta have two things—clear expectations and effective consequences. “You gotta empty the dishwasher in the morning” is meaningless without, “And if you don’t, you’re grounded from Facebook.”

Same thing in healthcare. What percentage of healthcare costs are driven by patient choice? A lot, right? Peripheral vascular disease, diabetes sometimes, obesity related issues, smoking related issues, alcohol and other addictive substances have some strong correlation to “patient choice,” and yet there are no direct consequences for those behaviors beyond the obvious—getting sick and dying. If I decide to eat (or drink or whatever) to the point where my health suffers, how about charging me for it? There is a point where my discomfort from paying higher premiums for instance will exceed my willingness to behave in a way that drives healthcare costs up. The point is simply that, without patient accountability, real healthcare reform is unlikely.

What is clear about ACOs so far is that they are big business; and there is huge interest among hospital systems in preparing for a battle royale with other hospital systems. Medical practices alike have “integration fever” and are ready to jump into nearly any mega practice arrangement that comes along. Consultants with everything to sell, from legal services to “healthcare consulting” services, are busy selling in an environment where the motto has quickly become “Do something, anything!”  It’s been reported that nearly half the attendees at the 2010 ACO Congress in Los Angeles were lawyers and consultants! Come on, this isn’t the first time experimentation was driven by them. Remember PHOs?  What about IPAs? What about Clinics without Walls?  If someone is gonna make money from fixing your problem, don’t trust it! Question it closely! Examine and explore it and see if what you’re looking at really fits within common sense business principles.

One of the clear problems of this time is that fear of the unknown and of change has become so distracting that many physicians feel overwhelmed, which is making physicians (1) buy or join anything, and (2) do nothing.  And yet, there is so that physicians can do to make things better.  Right now!  For instance:

Billing and collection. Many physicians don’t have a grasp on it; and lots of money is left on the floor and obscured by unacceptable excuses.

The easiest money to make, many have said, is the money you’ve already earned. Physicians owe it to themselves to have a professional analysis of their billing and collection processes and systems and periodic audits. In fact there are professionals who get paid only if they find you money you’re leaving on the table.

Contract management.  Again, many physicians don’t know what they are entitled to receive from each of the many payer contracts they sign. They don’t know what they’re not being paid. Again, some professionals will do the analysis on a fee basis and others on a found money basis.

Overhead. There is a huge amount of waste in many offices. And there are professionals who promise to lower overhead and to charge only on the basis of their success! No savings, no fee.

Coding. One of the more surprising things is that physician coding audits find not only miscoding, but also under-coding. Physicians routinely leave money on the table when it comes to coding. They owe it to themselves to audit their coding practices annually.

Marketing. Where does money get spent by many companies in a “down” economy? Most increase their sales and marketing budgets. For instance, websites and SEO (search engine optimization) functions are driving new business that was unheard of in the past.

Business plan. Most businesses don’t leave home without it. And yet most physician practices don’t have one.

Growing. The Cadillac model for physician practices has always meant bigger and more integrated practices. That’s not new. Physicians ought to look at integration options that create economies of scale, that improve their negotiation strength, and which create new revenue sources (from a larger patient base).

ACOs will continue to entail questionable accountability, care and organization, but will continue to be a hot topic for years.  Physicians have to stay interested and deeply involved and do what they can to make things better in their practices while they watch the latest trends roll in with great consultant expectations and promises, morph…and roll out.  The dirty little secret of this era is that healthcare reform can be a little like chicken soup to physicians because it can stimulate some really healthy adaptations to bring down costs and enhance revenues. Keep looking for the opportunities!

Jeffrey L. Cohen has over 20 years of healthcare law experience. He is board certified by The Florida Bar as a specialist in healthcare law and is a frustrated comedian.  As Founder of The Florida Healthcare Law Firm, he can be reached at (888) 455-7702 and also


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