Paying Doctors to Deny Care


ObamaCare was supposed to be all about increasing access to healthcare, especially for the poor and disabled. President Obama was concerned that patients were being denied care in order to increase the profits of others. As a presidential candidate, Obama stated one of his goals was “making sure that they are limited in the ability to extract profits and deny coverage.”

Robert Book, contributor to Forbes, says the Obama administration is doing exactly what candidate Obama said he would stop – denying care to increase profits.

Accountable Care Organizations

A little known provision of ObamaCare is to set up Accountable Care Organizations (ACOs) to incentivize providers (hospitals and doctors) to save money – by denying care. These cooperative endeavors are designed to encourage hospitals and doctors to unite in joint efforts to lower the costs of federally provided healthcare. The incentive for these providers is they get to keep some of the savings for themselves.

Section 3022 of the Affordable Care Act (ACA) establishes the Medicare Shared Savings Program (MSSP) which establishes the ACOs. These ACOs are paid to “reduce costs” for treating their patients. Seems like an innocuous goal but as usual the “devil is in the details.”

First, patients don’t “enroll” in an ACO. They are assigned to one based on the preponderance of their utilization. In other words, at the end of the year if a patient has used a lot of medical services (generated a lot of bills) from physicians who are members of a particular ACO, then that patient is assigned to the ACO. (They might not even be aware they have been assigned.)

The ACO receives bonus payments based on the total amount Medicare pays for care of those patients assigned to the ACO. This total is based on all care of those patients, including care provided by non-ACO providers. Bonuses are based on reducing total costs relative to what would be expected risk-adjusted cost based on each patient’s health status.

Second, in order to reduce costs it is necessary to reduce services – give patients less care. The incentives to providers encourages them to recommend fewer surgeries, fewer hospital stays, less frequent follow-up appointments and less expensive medications. It also incentivizes providers to refer to other physicians in the ACO – so those providers have the same incentives.

Obviously this system works best when the ACO is large and controls a significant share of the healthcare-provider community. It is less effective if the patient has many other options. This is one of the reasons hospitals are purchasing physician practices – so they can reliably control the doctors that will be in their ACOs.

How successful are these ACOs?

Ironically, most of these ACOs have not been very successful.

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.”

But ACOs are far from dead. Just last month Florida Senator Bill Nelson (D) was pleased to announce a new partnership between Florida Accountable Care Services (FACS) and United Healthcare. The joint venture goes live on April 1. The new ACO is being promoted “to improve people’s health and satisfaction with their healthcare experience.”

“Our primary goal now is to assist the independent physicians in Florida in the management and operation of ACOs and provide them with the tools, services, and technical expertise they’ll need to succeed in the shifting landscape of health reform,” said Sandeep Bajaj, M.D., founder and CEO of FACS. “Together, we expect to achieve even better health outcomes and improve patient satisfaction, while reducing the overall cost of care.”

“With this new accountable care program, we can help ensure that people receive more personalized and better connected care,” said David Lewis, CEO of United Healthcare of Central and North Florida.

That’s a lot of happy talk from those who stand to benefit financially from this cooperative venture. Until they can show me outcomes data that proves patients are actually better off from these ACOs, count me skeptical. It still sounds like just another Obama administration plan to reduce healthcare costs by denying people healthcare.

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