Skip to content
  • About
  • Contact
  • Contribute
  • Book
  • Careers
  • Podcast
  • Recommended
  • Speaking
  • All
  • Physician
  • Practice
  • Policy
  • Finance
  • Conditions
  • .edu
  • Patient
  • Meds
  • Tech
  • Social
  • Video
    • All
    • Physician
    • Practice
    • Policy
    • Finance
    • Conditions
    • .edu
    • Patient
    • Meds
    • Tech
    • Social
    • Video
    • About
    • Contact
    • Contribute
    • Book
    • Careers
    • Podcast
    • Recommended
    • Speaking

How ACOs creatively destroy fee for service medicine

David K. Cundiff, MD
Policy
May 13, 2011
Share
Tweet
Share

The U.S. Department of Health and Human Services (HHS) advocates the “creative destruction” of the traditional system of U.S.physicians practicing solo or in small groups operating as small businesses.

Republicans and Democrats approve of ACOs in concept. The Affordable Care Act of 2010 calls for shifting from fragmented care provided by uncoordinated health care professionals to integrated treatment by “accountable care organizations” (ACOs). While still evolving in terms of definition and regulations, the HHS’ model of ACOs would consist of primary care providers, specialists, and possibly hospitals with professional healthcare management personnel.

Unlike the fee-for-service system, an ACO-based  health care system would supposedly not depend financially on the volume of consultations, tests, treatments, and days in hospital delivered. Funding of ACOs would be “prepaid” from some combination of government insurance (e.g., Medicare, Medicaid, etc.) and patient and/or employer insurance premiums supplemented, if needed, by social safety net funds.

ACO-employed providers and managers would be financially at risk for cost overruns and would receive bonuses for providing “quality care” at a low cost. Proponents of this proposed health care sea change argue that ACOs will offer a system that financially rewards good health outcomes and reasonable prices.

Opponents of ACOs see little or no difference between ACO-style cost control and the health maintenance organization (HMO) method of saving money that caused a consumer backlash in the 1990s. Unknown is whether ACOs will return us to the infamously inflexible managed-care “gatekeepers”backed up by narrow networks of specialist providers all moving at an institutionally defined slow pace calculated to enhance the medical corporations’ financial bottom lines.

The HHS’ emerging ACO business model seems to center around increasingly coercive HHS-imposed financial incentives and regulations for doctors and hospitals. The resulting “health care reform” is designed to costless money for the HHS, private insurance companies, and employers. Operationally, the HHS’ requirement for “quality health care” is defined by the HHS with plans for monitoring by universal electronic medical records, documenting the compliance of health care professionals with HHS-sanctioned “evidence-based” clinical practice guidelines. In the new scenario, whether doctors or hospitals play the dominant role and earn the most profits depends on which group best performs according to the HHS’ cost and quality targets.

In the midst of the already underway creative destruction of the fee-for-service health care system, a battle between hospitals and physicians is developing over the structure and ownership of the evolving new ACO-based health care system. At stake for hospitals is their dominant role in the health care system and for physicians the issues are income, autonomy,and work conditions. Whoever controls the ACOs will capture the largest share of any profits from efficiencies. Hospitals appear to be winning the ACO ownership war by rapidly purchasing physician practices, relegating doctors to the role of employees.

What is wrong with this picture?

Do we want physicians to receive bonuses for providing HHS defined “quality care” at a very low cost? Do we want ACOs that provide what patients consider exceptionally good care but what the HHS deems too costly to suffer financially or go bankrupt?  Do we want an ACO industry dominated by hospital administrators, relegating physicians and other health care providers to employees with little clout to advocate for patients? I don’t think we want any of these kinds of options. Patients, not the HHS, should be defining “quality care” and “reasonable cost.”

To reconcile the flaws with the HHS model of ACOs,consider having ACOs constituted as nonprofit “accountable care cooperatives”(ACCs) owned by all the patients enrolled. Additionally, think about having clinical practice guidelines and benefit packages defined, not by the HHS, but by the ACC physicians and managers with the consent of the patient owners. With this scenario, ACC managers employed by the ACC patient owners would hire primary care physicians and selected specialists. ACC managers and physicians would contract with hospitals and other health care service and product providers based on value to patients rather than HHS mandates.

With prepaid funding adjusted for the health risks of patients, ACC physicians would have incentives to eliminate waste in tests, treatments, specialists consultations, and hospitalizations balanced by strong motivations to provide excellent care to their bosses—patients. Specialists and other health services providers not employed by ACCs or hospitals would compete for referrals from ACC physicians with input from patients. Instead of bonuses to physicians and hospitals that meet HHS targets, savings from eliminating unnecessary medical interventions, as defined by individual ACCs, would go back to the patients in the form of reduced premiums and enhanced beneficial health services. Government social safety net funds could be channeled to ACCs to provide funding for premiums for people unable to pay. Patients could choose between competing ACCs based on quality of care and cost of premiums, changing ACCs if they become dissatisfied.

The private insurance company of each ACC would collect the medical premiums from enrollees and health risk adjusted funds from the federal government—in lieu of Medicare, Medicaid, etc. They would then distribute the funds according to the dictates of the ACC staff. Close monitoring and reporting on each ACC’s allocated services and the associated health outcomes would drive changes in benefits offered and assure continuous quality improvement.

David K. Cundiff is an internal medicine physician and author of Money Driven Medicine Test and Treatments That Don’t Work.

ADVERTISEMENT

Prev

Mental health and the shortage of psychiatric help in the ER

May 12, 2011 Kevin 4
…
Next

Transfusing a Jehovah's Witness during surgery

May 13, 2011 Kevin 58
…

Tagged as: Primary Care, Public Health & Policy

Post navigation

< Previous Post
Mental health and the shortage of psychiatric help in the ER
Next Post >
Transfusing a Jehovah's Witness during surgery

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

More by David K. Cundiff, MD

  • a desk with keyboard and ipad with the kevinmd logo

    A call to retract the JNC-8 hypertension guidelines

    David K. Cundiff, MD
  • a desk with keyboard and ipad with the kevinmd logo

    Cut hospitalizations to reduce hospital related medical errors

    David K. Cundiff, MD
  • a desk with keyboard and ipad with the kevinmd logo

    The story behind a whistleblower doctor license reinstatement hearing

    David K. Cundiff, MD

More in Policy

  • Why Medicaid cuts should alarm every doctor

    Ilan Shapiro, MD
  • Why physician voices matter in the fight against anti-LGBTQ+ laws

    BJ Ferguson
  • The silent toll of ICE raids on U.S. patient care

    Carlin Lockwood
  • What Adam Smith would say about America’s for-profit health care

    M. Bennet Broner, PhD
  • The lab behind the lens: Equity begins with diagnosis

    Michael Misialek, MD
  • Conflicts of interest are eroding trust in U.S. health agencies

    Martha Rosenberg
  • Most Popular

  • Past Week

    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How medical culture hides burnout in plain sight

      Marco Benítez | Conditions
    • How the 10th Apple Effect is stealing your joy in medicine

      Neil Baum, MD | Physician
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
    • Why Medicaid cuts should alarm every doctor

      Ilan Shapiro, MD | Policy
    • Key strategies for smooth EHR transitions in health care

      Sandra Johnson | Tech
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • How dismantling DEI endangers the future of medical care

      Shashank Madhu and Christian Tallo | Education
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The broken health care system doesn’t have to break you

      Jessie Mahoney, MD | Physician
    • The silent toll of ICE raids on U.S. patient care

      Carlin Lockwood | Policy
  • Recent Posts

    • Inside human trafficking: a guide to recognizing and preventing it [PODCAST]

      The Podcast by KevinMD | Podcast
    • Earwax could hold secrets to cancer, Alzheimer’s, and heart disease

      Sandra Vamos, EdD and Domenic Alaim | Conditions
    • Why male fertility needs to be part of every health conversation

      Hoag Memorial Hospital Presbyterian | Conditions
    • Why health care must adapt to meet the needs of older adults with disabilities

      Lynn A. Schaefer, PhD | Conditions
    • How doctors took back control from hospital executives

      Gene Uzawa Dorio, MD | Physician
    • Improving patient encounters: time-saving strategies for physicians [PODCAST]

      The Podcast by KevinMD | Podcast

Subscribe to KevinMD and never miss a story!

Get free updates delivered free to your inbox.


Find jobs at
Careers by KevinMD.com

Search thousands of physician, PA, NP, and CRNA jobs now.

Learn more

View 38 Comments >

Founded in 2004 by Kevin Pho, MD, KevinMD.com is the web’s leading platform where physicians, advanced practitioners, nurses, medical students, and patients share their insight and tell their stories.

Social

  • Like on Facebook
  • Follow on Twitter
  • Connect on Linkedin
  • Subscribe on Youtube
  • Instagram

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

  • Most Popular

  • Past Week

    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How medical culture hides burnout in plain sight

      Marco Benítez | Conditions
    • How the 10th Apple Effect is stealing your joy in medicine

      Neil Baum, MD | Physician
    • Why flashy AI tools won’t fix health care without real infrastructure

      David Carmouche, MD | Tech
    • Why Medicaid cuts should alarm every doctor

      Ilan Shapiro, MD | Policy
    • Key strategies for smooth EHR transitions in health care

      Sandra Johnson | Tech
  • Past 6 Months

    • Why tracking cognitive load could save doctors and patients

      Hiba Fatima Hamid | Education
    • How dismantling DEI endangers the future of medical care

      Shashank Madhu and Christian Tallo | Education
    • What the world must learn from the life and death of Hind Rajab

      Saba Qaiser, RN | Conditions
    • How scales of justice saved a doctor-patient relationship

      Neil Baum, MD | Physician
    • The broken health care system doesn’t have to break you

      Jessie Mahoney, MD | Physician
    • The silent toll of ICE raids on U.S. patient care

      Carlin Lockwood | Policy
  • Recent Posts

    • Inside human trafficking: a guide to recognizing and preventing it [PODCAST]

      The Podcast by KevinMD | Podcast
    • Earwax could hold secrets to cancer, Alzheimer’s, and heart disease

      Sandra Vamos, EdD and Domenic Alaim | Conditions
    • Why male fertility needs to be part of every health conversation

      Hoag Memorial Hospital Presbyterian | Conditions
    • Why health care must adapt to meet the needs of older adults with disabilities

      Lynn A. Schaefer, PhD | Conditions
    • How doctors took back control from hospital executives

      Gene Uzawa Dorio, MD | Physician
    • Improving patient encounters: time-saving strategies for physicians [PODCAST]

      The Podcast by KevinMD | Podcast

MedPage Today Professional

An Everyday Health Property Medpage Today
  • Terms of Use | Disclaimer
  • Privacy Policy
  • DMCA Policy
All Content © KevinMD, LLC
Site by Outthink Group

How ACOs creatively destroy fee for service medicine
38 comments

Comments are moderated before they are published. Please read the comment policy.

Loading Comments...