It’s tough to admit our mistakes. It’s especially tough to do so in a nationally published newspaper like The Wall Street Journal.
So I was especially impressed to read an article written by Dr. Bob Kocher that was entitled I Was Wrong About ObamaCare. Kocher says he was the only physician on the National Economic Council that advised President Obama on healthcare policy prior to the passage of the Affordable Care Act in 2010.
To be sure, the article is not a full-throated denouncement of ObamaCare, but any willingness to admit mistakes is something to talk about with this White House. Perhaps the only reason we’re reading this confession is that Dr. Kocher no longer works there – he is now a partner in the venture capital firm Venrock.
Changes in Healthcare Delivery
Kocher admits he made wrong assumptions about the best ways to deliver healthcare. He believed then that the consolidation of doctors into larger physician groups was inevitable and desirable under ObamaCare. He argued then, along with colleagues Ezekiel Emanuel and Nancy-Ann Deparle, that “these reforms will unleash forces that favor integration across the continuum of care.” Furthermore, they stated “only hospitals or health plans can afford to make the necessary investments” needed to provide the care we will need in a post-ACA world.
He is correct that the ACA would force the consolidation of hospitals and doctors. By his own admission, last year 112 hospital mergers happened, up 18% from the previous year. But he was incorrect that this would lead to better healthcare. He confesses, “What I know now, though, is that having every provider in health care “owned” by a single organization is more likely to be a barrier to better care.”
Studies show that when mergers happen in already concentrated markets, price increases can exceed 20 percent. A 2012 research study by the FTC and University of Pennsylvania professor Robert Town showed this. They also found that “physician-hospital consolidation has not led to either improved quality or reduced costs.”
Kocher reports that research over the past five years, some of it well summarized on a Harvard Medical School website, has indicated that savings and quality improvement are generated much more often by independent primary-care doctors than by large hospital-centric health systems.
Accountable Care Organizations
One of the touted advantages of ObamaCare was the encouragement of Accountable Care Organizations (ACOs) that were supposed to improve quality and lower costs by bringing providers and hospitals together with incentives provided by the government. But the track record of ACOs has been far from stellar as the White House has been reluctant to admit.
Reports in The Wall Street Journal indicate these ACO experiments have been largely a bust. The Medicare “Pioneer” ACO project originally featured 32 experienced health systems hand-selected by HHS because they had already made progress toward the ACO model. Thirteen – or one-third of the program – have since dropped out as they spent more than the old status quo. In year one, spending increased at 14 sites and only 13 of the 32 qualified for a bonus. In year two, spending increased at six of the remaining 23 and 11 received a bonus.
After netting out the bonuses and penalties, the Pioneer ACOs saved taxpayers a grand total of $17.89 million in 2012 and $43.36 million in 2013. All in, per capita spending was a mere 0.45% lower compared to ordinary fee-for-service Medicare. Yet the upfront start-up investments for the pioneers (in administration, compliance and information technology) ran to $64 million, so at best the program is a wash.
The editorial board of The Wall Street Journal says,
“ACOs are failing because HHS’s regulations are a classic case of counterproductive and arbitrary central planning: The government is paying hospital groups to generate slightly lower bills. As the quitters may have discovered, it is more remunerative to stay with the old system, with higher hospital bills but no bonuses.”
Again, Kocher admits what the White House would not. He says the latest data from the Centers for Medicare and Medicaid Services (CMS) released from 2014 show independent physician-led ACOs, like the Rio Grande ACO on the Texas border, are outperforming ACOs from many of the most famous health systems. Johns Hopkins Hospital in Baltimore has been ranked as one of the top three health systems in the nation, but its ACO failed to achieve shared savings in 2014.
Kocher now concedes that small, independent practices know their patients better than any large health system ever can. They can also make changes in response to improved information faster than large healthcare systems, which lowers costs and improves treatment. He now makes the following recommendations:
“Recognizing the strength in the small practices, the federal government needs to write rules that make it easier for them to thrive under ObamaCare and don’t tip the scales toward consolidation. . . . Personal relationships of the kind often found in smaller practices are the key to the practice of medicine. . . . It may sound old-fashioned, but what I have learned is that we do not need to sacrifice this unique feature of our healthcare system as we move forward in adapting new value-based payment models and improving the health of patients.”
Confession is a good thing – and being “old-fashioned” can be, too.