Networks Financial Institute 2013 ACA Forum

Summary:

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4: How Obamacare Will Re-Shape the Practice of Medicine – Efforts to Transform Outpatient Medicine Will Put the Entire Health Care System at Risk

Scott GottliebDr. Scott Gottlieb's presentation emphasized that the ACA is shifting medical risk from insurers to providers, primarily through various forms of capitation. In the future, large employers, government and insurance providers will assume risk under the ACA, but a shift in risk will transfer it to providers. To facilitate this shift in risk, Obamacare is exerting a continuing effort to get physicians to consolidate their practices into integrated delivery systems. These systems are often aligned with a hospital that serves as the central hub.

According to Gottlieb, the genesis for Obamacare may well have come from a 2009 article published in The New Yorker by Harvard surgeon Atul Gawande, that highlighted regional disparities between cost of care and health outcomes. Based on data from the Dartmouth Atlas Project, the article served as the Obama administration’s intellectual foundation guiding many parts of the ACA.

The shift in risk from insurers to providers echoes 1990 capitation models which proved largely unsuccessful. By calling for the formation of Accountable Care Organizations (ACOs), the ACA creates large groups of providers who are allotted funds to care for their specified populations. The ACA bundles payment dollars into a lump amount including outpatient and inpatient care, with an expressed goal of achieving efficiency through consolidated care. Dr. Gottlieb noted that a central ACA goal is to end the practice of fee-for-service medicine. Under this model, the physician will determine what services, procedures or drugs are utilized and the patient may never know what options were denied him because the doctor made the decision.

The shift in risk is driving consolidation and a trend away from out-patient procedures and billing. Dr. Gottlieb pointed to the trend of specialty and primary physician practices being absorbed by hospitals and a corresponding trend toward more procedures being performed in a hospital setting as opposed to an outpatient office.

The model that the ACA is based on is not new. Similar structures for consolidating care through hospital-based groups that acquired physician networks proved unsuccessful in the 1990s. Dr. Gottlieb noted that when the delivery systems of the 1990s failed, physicians were able to revert back to the former models, but that the enactment of the ACA will prohibit a return to previous patient service models.

Summarizing problems with the ACA, Dr. Gottlieb pointed to five central concerns:

  1. Consolidating providers results in falling productivity. Many experts have predicted a decline of 25 to 30 percent in productivity as the ACA is implemented. The challenge for providers will be to make the system more efficient without reducing productivity.
  2. A "magical" mindset in Washington, D.C. believes that consolidation will lead to better coordination of care through electronic records and other technologies. This view is somewhat myopic as hospitals have not historically proved skilled at integrating technology to deliver better care. Instead, transformative innovations have historically arisen from the entrepreneurial markets, driven by the investments of venture capitalists. In contrast, hospitals have traditionally not pioneered innovations, but have been adopters of technology. When looking at the venture capital markets, there have been almost no investments made in hospital-backed systems.
  3. While some critics say that a fee-for-service payment structure caused doctors to over-utilize some treatments, the payment model incentivized doctors to stay on the cutting edge of treatments and therapies. Without the role of entrepreneurs, it is unlikely that hospitals will lead a wave of innovation.
  4. Continuity of care will suffer. Studies have found that coordination between inpatient and outpatient care does not improve in an ACO environment. Simply accessing electronic health records is no substitute for the communication that occurs over time between a patient and her provider.
  5. Prices will increase. Dr. Gottlieb referenced research conducted by Ezekiel Emanuel and Robert Kocher that argues that consolidated care effectively creates monopolies, driving up market prices. Under the structure of an ACO, a hospital can capture arbitrage between inpatient and outpatient billing systems.

Unlike the experiments of the 1990s with consolidated health care delivery models, the ACA will be very hard to unwind after the fact. The structures required to "go back" will no longer exist. The ACA takes away the very tools (i.e. underwriting) that insurers traditionally employed to manage costs, with the exception of managing the network. Under the ACA insurers will manage the networks very tightly and be extremely selective with the areas they cover and the providers with whom they collaborate to provide services. As a result, consumers will see a significant narrowing of network choice.

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