Chasing Unicorns: The Future of ACOs

We have a great idea, a lot of momentum and no clue what might happen next.

By Ian Morrison

My good friend and colleague Mark Smith M.D., M.B.A., president and CEO of the California Healthcare Foundation (on whose board I sit), said it best:

“The accountable care organization is like a unicorn, a fantastic creature that is vested with mythical powers. But no one has actually seen one.”

I have re-blogged and re-tweeted (twitter@seccurve) this so often I got all the credit for the line. Welcome to the Internet age. But in all fairness to me, re-tweeting someone else’s intellectual property is as close as most of us get to original thought these days.

And that, my friends, brings me to why chasing unicorns is so important. Rising health care costs is a national security threat greater than any other. It will kill the budget, the economy and, some even argue, the patients because of unaffordability, excessive iatrogenic interventions and profligate use of resources. We desperately need some big new ideas about how to practically meet Don Berwick’s noble triple aim of better care, better population health and lower per capita costs.

One of those big new ideas is the accountable care organization.

Well, actually it is not an entirely new idea. And many in health care can (and are) legitimately claiming to having been one for a long time: Kaiser, Geisinger, Mayo, Cleveland Clinic, capitated delegated medical groups of California and even a few network model HMOs (among others) can say they were doing this all along.

I gave a little after-dinner talk to an elite group of ACO thought leaders in Los Angeles (basically the talk is the rest of this column) and it was a combination of both a roast and homage to Dr. Eliot Fisher of Dartmouth (who was there, I may add) and whom I always describe as a national treasure, not only for leading the wonderful Dartmouth Atlas work, which in many ways was the intellectual underpinning of, and the compelling case for meaningful health reform, but also widely credited with coining the term accountable care organization. But, as Eliot would be the first to modestly admit, many others in that room that night (Enthoven, Shortell, Levine, Crosson, Margolis, O’Kane, Robinson and too many more to adequately acknowledge here) are all part of the intellectual and practical foundations of this re-emergence of the accountable care organization vernacular.

At their very best, ACOs could be a powerful, successful, re-tweet of Enthoven’s managed competition, which a lot of us thought was a pretty decent American compromise the first time around (see a previous column, “The New American Compromise”). At its worst, it could be a badly defined mish-mash of half-baked ideas and experiments that is an orgy of excess for lawyers and consultants. As one colleague noted to me, probably half of the 1,500 attendees at the 2010 ACO Congress in Los Angeles were lawyers and consultants (myself included) eager to arm themselves with a new PowerPoint for an assault on the dazed and confused delivery system. (Google “ACO video” and you will find a brilliant cartoon about this on YouTube.)

So, here’s my take on ACOs and what we have to do to make them work right. I frame my suggestions very simply and modestly, first as a central two-part problem, and second as Morrison’s 10 Laws. (When you are a futurist you’re allowed to make up your own laws.)

The Mutual Disrespect Problem

There is in American health care a central problem governing the organization of health care. I call it the mutual disrespect problem, and it has two important parts:

Part 1: Everyone thinks everyone else’s job is easy.

Part 2: Anyone can do what a health insurance company does.

There is in health care an astonishing degree of mutual contempt for the component parts of the system: doctors hate hospital administrators, nurses hate doctors, and everyone hates insurance companies, especially the patients and the government.

Which brings me to the second part, namely, that every stakeholder assumes that whatever insurance companies do, the stakeholder could do easily for themselves. I have written before that insurers will be asked to explain their own benefit to society (see my earlier column, “Explanation of Benefits”). Insurers are having an exceptionally profitable year financially through no particular genius on their part it seems to me (just check their earnings against estimates). Despite all that, they actually do things that other actors (particularly hospitals and doctors) are pathetic at or incapable of such as eligibility monitoring, enrollment management, administration of benefits and, some would say, predictive modeling, population health management, case management, technology assessment and, of course, risk management.

So it is important, before we embark on this path to accountable care that we all start with a little self-awareness and good old-fashioned humility about core competencies to manage the risk for, and outcomes of, care for a defined population.

And so to the 10 Laws.

Morrison’s 10 Laws of Accountable Care

Morrison’s first law: Any organization that claims to be an accountable care organization, is probably:

• not accountable for a defined population;
• doesn’t care for patients beyond a few isolated episodes; and
• is not very well organized.

With the obvious exception of the organizations in the introduction that have a legitimate historic claim to being proto-ACOs, most people who are announcing themselves as accountable care organizations are full of it. Indeed, sometimes the louder the claim, the weaker the evidence. (It’s a bit like national politics, no?)

Morrison’s second law: You can’t be accountable for the care of patients … unless you know their phone numbers. The way the ACO provisions are currently framed, patients who end up in an ACO will be assigned to them through an “attribution logic.” Personally, if I was running an ACO, I’d rather know patients’ phone numbers so I can call them up and harass them about what they are eating. If I am going to be accountable for their health expenses, then I would like to be a wee bit proactive about identifying and managing the risk that I am taking on. And a really good start would be knowing exactly who the patients are. By the way, most doctors (or hospitals for that matter) don’t have a clue what other providers their patients go to or what their patients are doing when they are not with them, so this is not a new problem. It is just that now there will be money attached, both positively and negatively.

Morrison’s third law: Patients in accountable care organizations should at least know they are in them. Even I, with my perverted sense of humor, could not make this up. Patients in ACOs will not know they are in them. Mercifully, the policymakers are onto this aberration, so expect amended regulations that will require notification of the patients, possibly as follows:

“Dear Madam, Sir or Occupant,

Congratulations! Our attribution logic engine has automatically assigned you to get (almost all of) your health care from an organization with a new name that doesn’t mean anything but that actually used to be known as your local hospital. It is an accountable care organization now and it will be great for your health.

Have a wonderful day.

The People at Medicare

P.S. They don’t know who you are either so you might want to give them a ring.”

Morrison’s fourth law: Patients in accountable care organizations should not be allowed to leave, just because they had a bad day. Under pressure from the freedom and liberty folks, no one had the juice to say that patients in ACOs have to stay with them. No, the patients can skate away whenever they like. Imagine the money-losing, non-compliant, frequent flyer congestive heart failure patient being dumped on your doorstep because the hospital a few miles away paid for the limo and subsidized the patient’s rent so they could move in next door. Extreme, you say? In 25 years of observing American health care, I can say that it is a lot easier to dodge risk than manage care. This one really worries me, and I think it needs to be fixed, through voluntary enrollment for one-, two- or three-year periods, but once you pick, you stay. This could end up being an ideological deal breaker.

Morrison’s fifth law: Accountable care organizations must “bend the trend”; otherwise, it is a massive distraction for busy professionals who don’t have a life already. Look, everyone is busy. And so unless we are prepared to get behind the notion of bending the costs curve through more accountable health delivery systems, it will be a massive distraction that diverts our attention away from simpler, more immediate end points of improvement like avoidable readmissions, medication errors or primary care redesign. We must commit to slowing if not reversing total costs growth.

Morrison’s sixth law: Doctors love fee for service. They just want more fee and less service. We policy wonks (especially the economists) love to talk about reimbursement reform: Change the incentives and the system will reform itself. We are always talking about the incentives for doctors (since their decisions drive most health care costs). So my colleagues at Harris Interactive had the brilliant idea of asking doctors how they feel about all that. The Harris surveys show that the majority of physicians are, on balance, somewhat satisfied with their current reimbursement method (namely fee for service). They just complain about the amount of the payment for the level of effort involved in providing the service. But when it comes to changing the method of payment, the same surveys show that physicians don’t seem to like any of the provider payment reform ideas now circulating, including pay for performance schemes, bundled payment or global episodic payment. A recent academic survey confirmed Harris’s numbers that only about 16 percent of doctors would be in favor of accepting bundled payment.

The wonks designing bundled payment have not quite thought through the likely bloody wars in every hospital when a sack of money is dumped on the desk to cover all the costs of a hip or knee replacement: the diagnostic work-up, the DRG payment, the surgeon’s fee, the rehab and the readmission risk. Fights over who gets what will be reminiscent of the second battle in Braveheart.

Morrison’s seventh law: Any successful payment reform requires that you buy the doctors off in the short run so you can “grind the bastards down” in the long run. This is an almost direct quote (including the profanity) of a prominent executive of the British NHS when I asked her why they had spent 30 percent net new money on the British Primary Care Pay for Performance scheme. Generations before, Aneurin Bevan, father of the British NHS, was asked how in 1948 he secured the cooperation of the British doctors in health reform; he reputedly said, “I stuffed their mouths with gold.”

A similar story could be told of the dawn of Canada’s medical insurance in Saskatchewan in the 1960s. And yet, we in the United States did not learn the lesson of history, so the doctors never got a permanent sustainable growth rate (SGR) fix in health reform, and still don’t, going into a “spend no more” Congress. Oops.

Morrison’s eighth law: One man’s waste is another man’s income. There is enormous waste in American health care: unnecessary care, redundant care, defensive care, inappropriate care, unethical care, excessive care, futile care and corrupt care. But one man’s waste is another man’s income. In Japan, they call waste muda. In Oklahoma, they call it margin. Extracting waste, at least in the short run, means someone’s income has to either go down or disappear entirely; in the long run, we can reallocate. Again, this is easy to say, hard to do.

Morrison’s ninth law: The high-value ACOs seen through a Medicare lens may not be high value seen through an all-payer lens. (In other words, if hospitals integrate locally to be accountable will they end up being market dominating?) There are really two important consequences of this law. First is that despite the great work of the Dartmouth Atlas it doesn’t tell the whole story about performance because to date the data have been Medicare only. Yet as I have written about before (see “If Bernie Madoff Ran Health Care”), because of the enormous variation in commercial insurance prices to providers in various parts of the country relative to Medicare, the hospitals and regions who show well or badly under Medicare numbers may not be as good (for example Sacramento) or as bad (say McAllen, Texas) as their Medicare-only Dartmouth Atlas shows. The easy solution is for Dartmouth to get an enormous grant from someone to put all the data together, to report it all out and let the boards of hospitals be truly accountable for analyzing, explaining and governing their stewardship of resources.

The second idea in this law, and one that regulators are confronting head on and fast, is that if health care providers consolidate locally in the name of accountable care organizations, will it lead to a concentration of market power and, in turn, even higher prices? Provider consolidation has been going on like crazy for a decade, and many argue that this explains the rising prices seen in many markets. The ACO trend could make this situation even worse without appropriate policy and regulatory oversight.

Morrison’s tenth law: The people most capable of managing the care of populations are the people least trusted to do it. Certain aspects, if not many, of managing the care of populations may be best done by a managed care organization. Yet surveys of doctors and the public reveal that managed care organizations are the least trusted, are the most deserving of more regulations, and are perceived by physicians to have done more to harm quality than almost any stakeholder, with the exception of malpractice lawyers and the government.

Looking Ahead

Despite my natural Scottish cynicism, I am incredibly excited that the health care marketplace is embracing accountable care, and that hospitals, in particular, are running as fast as they can to integrate with their physicians and figure out mutually beneficial ways to get higher performance for the communities they serve.

We should be deeply grateful to the leaders of the accountable care movement (past, present and future) for their tireless efforts to energize the health care field to achieve better health for populations, higher quality of care and lower cost. We salute you all.

ACOs are vaguely defined, conceptually fuzzy and badly constructed, both legislatively and managerially, and they are potentially profoundly unpopular with doctors and patients. But they may be our best hope to have an organized health care system that is accountable for our care.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif. He is also a regular contributor to H&HN Weekly and a member of Health Forum’s Forum Faculty Speaker Service.