What’s an ACO?

The new reform laws raise more questions than they answer.  One particular question was asked a lot at two national conferences I attended last week: what’s an Accountable Care Organization?  Policy-makers seem to be placing high hopes on ACOs—integrated and aligned systems where all who care for an individual patient are at risk for delivering care of defined quality as inexpensively as possible [my definition]. 

Countless health care leaders will attend conferences over the next year to see if becoming an ACO is the key to their organizations’ survival under “ObamaCare.”  I’ll step out on a limb and argue that becoming an ACO will be critical to the future success of most providers.  I really like the general concept.  However, I fear for three reasons that it will do more harm than good if the bureaucrats define ACO too narrowly when they translate Congressional intent into regulations.

First, the rule-writing process will take years.  Very few health care organizations can afford to wait for the “feds” to tell them how to qualify for financial incentives that may ultimately be directed to ACOs.   Integration is imperative now.  The American economy cannot continue to support the waste that fragmentation generates in our health care delivery system.

Second, an ACO must integrate more than hospitals and physicians.  To deliver the full benefits of alignment, an ACO must encompass key economic units on the supply and demand sides of a medical marketplace—accountably and transparently.  In my view, a successful ACO will not only put doctors and physicians on the same balance sheet, but also bring payers, purchasers, and patients into the mix. 

Third, competition between ACOs is needed to produce the full benefits of multi-stakeholder integration.  I am concerned that regulations will turn the solution into a problem.  A “one size fits all” definition of ACO would stifle the competitive innovation and diversity that caused Congress to favor ACOs in the first place.  For example, Kaiser-Permanente and the Geisinger Clinic are two of the highly integrated delivery systems examined by Congress, but they achieve their impressive successes in different ways. 

I fear bureaucratic rule-making will produce a narrow definition that excludes different paths to acceptably accountable care.  (It’s happened before.  Kaiser-Permanente ultimately chose not to seek designation as a federally qualified HMO under the 1973 Health Maintenance Organization Act that was based on the Kaiser model.)  So what’s an ACO?  It is a new and improved delivery system engineered to produce efficient and effective health care through partnerships of all key players in local markets.  Ideally, ACOs will be as different as the marketplaces they serve.  The less the concept is standardized beyond its generic attributes, the better. 

How would you define an ACO?  Is your health care organization ready to rise to the challenge now, or are you waiting for the Secretary of HHS to define it for you later?  

What are the real “costs” of reform?

Critics of health reform found some fuel for their fire in reports just issued by the Congressional Budget Office and the CMS Actuary.  Both official government agencies increased their previous estimates of federal costs of insurance overhaul—thus renewing questions about reform’s long-run economic impact and political tactics used to get the bills through the House and Senate.  Both reports put the new cost projections well above an economic threshold that swing-vote legislators were unwilling cross only two months ago.

As an experienced forecaster and economist, I doubt both the original and the revised estimates for three reasons. 

• The cost estimates are based on highly speculative assumptions.  The future values of variables in the estimating equations are SWAGs at best.  In particular, I believe they grossly overestimate consumers’ economic capacity to hold up their end of the “bargain.”
• The federal government has a very poor record of estimating the future costs of previous health care legislation.  Actual government expenditures have been well above earlier estimates much more often than they have been below, but they’ve never been right. 
• In their defense, the federal employees responsible for estimating reform’s costs were not given the time or resources to do a good job over the past year.  Indeed, the CBO Director recently issued a very reasonable statement about the unreasonable pressures put on his staff, but it did not get the attention it deserved.

Nevertheless, I believe that the estimated federal cost of the latest reforms is a red herring.  To me, the critical question is whether the reforms do anything to improve the quality of care and to stop the persistent increase in expenditures.  The latest laws fail on both these counts.  Insurance overhaul simply shifts a substantial portion of the rising costs of a dysfunctional delivery system from the federal government to payers and purchasers (including state governments).  A lot of excellent ideas for improving the system were lost last fall when Democrats in Congress began to focus on passing a law rather than improving the delivery system. 

I think we’ve got to get refocused on efficiency and effectiveness in the medical marketplace.  We do not need estimates of reform’s costs for the federal government to know that the status quo is unaffordable for everyone.  We will be even deeper in a financial hole if we spend the coming years fighting over the minutia of regulations when we ought to be re-engineering the entire health care delivery system.  What do you think?  Alternative points of view are welcome and will be published.  That’s what a healthy debate is all about.   

What’s an “affordable” health plan?

As a health futurist, I feel comfortable predicting that one of the hottest political issues for the next few years will be designing the “affordable” health plan that uninsured Americans must purchase in 2014.  The insurance overhaul laws delegate the general task to the Secretary of HHS, but they also dictate specific services that must be included in the mandated packages.  The process of combining regulatory authority with statutory mandates will be one big can of worms.  (The equivalent French expression, translated as a nest of poisonous snakes, provides an even better metaphor.) 

The reform laws themselves set the stage for a bitter battle by decreeing that plans must include many “basic” services to comply with the law—but defining them is one of more than a thousand “the Secretary shall…” delegations of authority in the legislation.  Having observed the promulgation of federal regulations for nearly 40 years, I do not foresee this process going smoothly.  It sets up intense battles between some of the most powerful constituencies in Washington.  Providers, payers, purchasers, pharma, and other suppliers and will fight to protect their interests under the negative-sum budget constraints built into the laws (if Congress continues to honor its current intent, another area of uncertainty). 

The new laws also identify preventive services that must be covered.  Many of these tests are politically popular, but they are also expensive and imprecise.  For example, the “affordable” health plans must pay all costs of breast and prostate cancer tests that are not clearly supported by scientific evidence or economic analysis.  Ironically, the debatable prevention mandates were legislated by the same Congress that made a major commitment to comparative-effectiveness research in the economic recovery law of 2009.  This policy conflict will further complicate the Secretary’s efforts to translate Congressional intent into viable, deficit-reducing regulations between now and 2014.     

In spite of these problems, a basic and affordable health plan must be developed.  It is an essential step for creating an efficient and effective health system.  However, I fear the politics of implementing insurance overhaul will get in the way of doing what needs to be done.  I am optimistic, on the other hand, that partnerships of dedicated stakeholders will develop good, progressive health plans in state and local markets.  I expect that I will be deeply involved in this quest.  Please join me by sharing your concepts of health plan design that reflect the medical science, technologies, and economic realities of the next decade.   In your view, what services should and should not be covered in a basic, affordable health plan? 

Complexity, Chaos, and Opportunity

Being a health care futurist is not easy these days.  (Paradoxically, it is fun.)  The executives and caregivers who read my writings or listen to my speeches want to know exactly what to expect so that they can prepare accordingly.  Most would prefer a clear picture of where our industry is headed—even if they didn’t like it—to an ambiguous and confusing view. 

I often sense their disappointment when I make the case that health care is moving in many contradictory directions at once.  I try to convince them that they understand what’s happening if they are confused.  Washington’s efforts to solve the medical economy’s problems don’t follow a logical path toward a discernable and desirable outcome.  Neither party has taken the time to define a good health care system and a viable plan to create it. 

Insurance overhaul is driven by a compelling need to stop the relentless rise in spending on medical care.  The “Obama Care” laws include major cuts in government spending, but they do not create an efficient and effective health system for patients who are being mandated to make up the difference.  The laws also allow outcomes to differ substantially on a state-by-state basis, and they will create a wide variety of unintended consequences across the nation.  The result will be chaotic—the opposite of ordered.  

Health care is not the only American industry headed toward disorder in the absence of a viable, coherent goal.   The recent proliferation of best-selling books on complexity and uncertainty focuses on other sectors of the economy, particularly finance and natural resources.  Health care is not the only industry suffering from serious problems created when independent economic entities compete for fixed resources in a zero-sum game that has no shared rules or respected referees.

            

The good news is that chaos is not necessarily a bad thing.  Science teaches us that order can emerge from disorder, either randomly or purposefully.  One of the 20^th century’s great economists, Joseph Schumpeter, used this principle to show how a process he called creative destruction replaces dysfunctional enterprises with progressive competitors.  In other words, today’s progressive health care leaders will see disorder as an opportunity to replace old ways of doing business with new ones. 

Health reform from Washington will get in their way, but it won’t prevent them from harnessing medical science, information and communications technology, and collaborative partnerships to create health systems attuned to the resources of their marketplaces.  The work won’t be easy, but it will be rewarding.  I’m excited by the opportunities to embrace change and reinvent health care.   How about you?