Accountable Care Organizations: More Central Planning from ObamaCare

Buried within the 2,700 pages of the new federal health care law is one of the important mechanisms government officials will use to centrally plan and control our health care system – the accountable care organization (ACO).

The law states that by 2012 doctors and hospitals are encouraged to legally join together to form groups covering at least 5,000 patients each that will be “accountable” for cost, quality and overall care.  These groups will become permanent fixtures in Medicare and will start as pilot projects within Medicaid.  As the government enlarges its control over pricing and benefits in the private health insurance market, ACOs will become a fixture in the new state-based insurance exchanges as well.

When up and running, an ACO will simply function as a health maintenance organization (HMO).  HMOs have been around for forty years and have never gained popularity because they restrict patients’ choice of providers and have a reputation of emphasizing cost-cutting over providing quality care.

All providers working for an ACO will receive a single payment check, or so called capitated payment, for each patient.  The check will then be divided by some formula (to be determined) among the doctors and hospitals in the ACO who treated that patient.  Payment levels will be set by the government and providers will initially be rewarded by sharing in any savings realized by the government.  As demand for health care continues to explode and as the federal government runs out of money, the bureaucrats will likely decrease the payment levels and ACOs will then be forced to ration the health care patients receive.

The actual structure of an ACO is not specified in ObamaCare, but the law does give the Secretary of Health and Human Services (HHS) wide latitude in the approval of any group that applies for ACO status.  The commanding phrase, “the Secretary shall...” occurs repeatedly in the legislation.”  The law does not provide for judicial review. Patients will not be allowed to petition in court if they feel needed care has been denied to them; the Secretary of HHS will have total rule over this expanding part of our health care system.

ACOs may take on various forms.  Group Health Cooperative and Kaiser Permamente are established integrated systems with their own health insurance.  Virginia Mason, university hospitals and the Mayo Clinic are examples of existing doctor/hospital groups that contract with multiple health insurers.  The most popular and growing model today is the private hospital-employed physician practice.

As the government takes over more of our health care financing, the independent private doctor’s office will cease to exist.  In 2005, two thirds of practices were doctor-owned. By 2011, less than forty percent will be physician-owned, according to the Medical Group Management Association.  This trend will accelerate as doctors realize that to be paid they must give up their independence and join a large health care delivery system.

To make ObamaCare work financially, the government is supposed to cut almost $600 billion from the Medicare program over the next ten years.  Even with these cuts, early estimates of cost overruns are at least $500 billion in the first ten years, and up to $2.4 trillion in the second ten years.  The government will ultimately force providers into ACOs and use these groups as one of the mechanisms to control costs and ration our health care.  In the meantime, the venerable tradition of the local doctor’s office run as a small independent business will have come to an end, and the pledge “if you like your doctor you will be able to keep him” will join the lengthening train of broken health care reform promises.