What physicians should believe about Accountable Care Organizations

by Jeffrey L. Cohen

In the 90s, physicians were told “The sky is falling. You have to find a tree to stand under or you will be crushed.” The “trees” were things like IPAs and PHOs. The future outlook was bleak. All patients were going to be part of some system with which the physician would have no input or control. Decisions would be made on purely business grounds. And the end of fee for service medicine was at hand. Not.

Here we are today in the face of a national healthcare reform drive. Again, any claim the sky is falling and civilization as we know is will be undone. It is the end days for private practice of medicine. Not.

The truth is clear: this is a time of serious change in terms of how the United States intends to view and approach the delivery and payment of healthcare. The creation of Accountable Care Organizations (“ACOs”) and the dominant role of insurance companies and Pharma sound terrifying. terrifying. Clearly, the stated intent is to reduce cost and improve outcomes.

Things like clinical pathways are coming back into focus. Discussions about Physician Hospital Organizations (PHOs), Independent Practice Associations (“IPAs”) and Super LLCs are being renewed and reconsidered against the changing landscape. The market that once existed for sellers of medical practices has withered. Certain specialties, like cardiology, are being hit extremely hard with cuts not only on physician services, but also on diagnostic imaging services that drive a lot of revenue to them. And once again the gong of the death of solo and small practices is being banged once again. Physicians are understandably frightened.

Change is change. It upsets people. And this is not the first time in the past 20 or so years that physicians have been at the butt end of it. That said, they should be wary of the “end of days” salesmen, those which sell products and strategies based on the assumption that life as they know it will end. Physicians should take a hard and long look at the things they are being asked to buy in order to survive the coming tsunami. Does the vendor have an economic stake in the decision? Buyer beware.

So, what are the most popular myths floating around now?

1. You have to spend a lot of money very quickly to comply with the HITECH Act and to get the incentive money for using EMR. Wrong. In fact, physicians that jump quick are likely to get sold stuff that is expensive and doesnt work. Instead, take your time to have an IT expert with no products to sell evaluate your IT needs and see what the most workable options are. Spend more time on the “shoe fitting” and take your time making a decision to buy.

2. Physicians that are in small and solo practices will die off quickly. The simple truth is has always been that small practices are, generally speaking, economically inefficient and limited. Thats not new! What is new is that there are more economic and regulatory pressures and any healthcare reform will be paid, in part, by payment reductions to physicians. Mega groups are an option,
but just one. Look at all forms of alignment and integration, including IPAs, PHOs and others.

3. Mega practices rule. Nah. It really depends on the “glue” of the practice. are they together simply to get new revenues from ancillary services? Many are, and that does not create great strategic advantages. The bottom line in terms of market position is (and always has been): a financially efficient business model (low expenses and high income) which accomplishes and demonstrates value.

4. Accountable Care Organizations will be physician led. Though the opportunity certainly exists and think-tankers favor physician led ACOs, the simple truth is that creating ACOs requires huge time availability, business expertise and capital, the very things that physicians are most challenged by. That said, physicians are at the center of any ACO model and their participation and leadership in ACO development and operation is critical.

5. This is the end of fee-for-service medicine. Probably not. Though the legislation clearly identifies FFS compensation as the villain for our country’s healthcare spending, and though risk based compensation will likely play a larger role, some of the Stage 1 cost savings models pay on a fee for service basis. Moreover, it is important not to become entranced entirely with the insured market. There is a First Tier market of proprietary products and models, like VIP and Concierge practices which will likely grow for high patient contact practices (e.g. cardiology, internal medicine, diabetes).

I personally do not see the end of the medical world, though I do see big changes over many years. I do not see the end of the solo or small practice, though I do see more economic stresses. And I do not see a “one size fits all” solution at all. The options require careful and calm analysis. And the old hard-won strategies that have always won will always win:

1. Increase profitability by any legitimate means that is sustainable. For instance, practicing medicine with a bunch of other physicians you do not want to be around or speak with may be profitable but not sustainable;

2. Make your lifestyle more digestible, a particularly challenging request in sunny South Florida; and

3. Ensure that any strategy you enact include (a) increasing reliance on workable EMR, and (b) tracking, improving and communicating clinical outcomes.

Change is here. More change will come. It is not an end, but rather always something new, surprising and never quite as awful as anticipated. Healthcare reform is less a thing than a conversation at this point. That said, we should all be proactive in plotting our futures. Be adaptable. Be smart. And be patient.

Jeffrey L. Cohen is a healthcare attorney who blogs at ACO Watch.

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  • http://fertilityfile.com IVF-MD

    As a solo practitioner, I’d be curious if you could provide some evidence for your statement of “The simple truth is has always been that small practices are, generally speaking, economically inefficient and limited.”

    In comparison to my colleagues in large mega groups, my overhead appears leaner and more efficient.

    Sure, this may be anecdotal, but here are some objective findings.

    - The mega groups often have a non-medical CEO on staff to deal with administrative decisions. They also have a marketing person whose sole job is marketing. That’s about 200K to 300K worth of salary for personnel who participate zero in delivery actual the patient care.

    - The mega groups have a lot of legal fees to deal with the agreements and contracts between the associate doctors.

    Right there we already have a lot of added overhead that will be made up either by cramming more patients into the daily schedule or by the physicians working more hours.

    Again, my conversations with my colleagues confirm for me that in general, they feel their daily schedule is more hectic than mine and that their patients do not have as much face-to-face time with doctor as mine.

    I’ve been approached over a dozen times to consider joining some of these groups and there was a short time right after graduation where I was in one. While there many be some advantages of being in a big group, such as more flexible vacation time for the doctor (and yes, that’s a big one), I have to admit, there are a lot of advantages of being a single practitioner.


    • Peter

      I agree. I went from a large since speciality group to solo pracitce. My practice is MUCH leaner and much more efficient. My overhead is 1/3 what it used to be. I can now see half as many patients, that is, take twice as much time with them. Solo practitioners and small practices will never disappear. Doctor fall into the sky is falling mantra so easily. We are like sheep being led to the slaughter. Stand strong, be smart, think like a business person, ACO’s will never last. I bet we never see them. It’s just another attempt to get doctors working for hospitals, now with the government support.

  • ninguem

    “The simple truth is has always been that small practices are, generally speaking, economically inefficient and limited.”

    That is NOT true. Right there, all credibility is lost.

  • jsmith

    Pretty easy to come up with a dozen detail-poor predictions about the future. Not to helpful though.

  • John Ryan

    There are undoubtably small practices that are inefficient and in trouble, as there are large groups with problems. But having been in both, there is nothing that can run leaner than a one or two doc primary care practice. You can micromanage, cross train and motivate. since you are “all in”, and I can do my job with no equipment but a ball point pen. No hired practice manager or CEO can accomplish that. My concern is that the increasing bureaucratic requirements from our “big brother” government is stacking the deck against those of us who don’t want to employ a full time person to fulfill inane mandates.

    The government bean-counters will get what they deserve if all of us are forced into ACOs, mega-groups or hospital-owned practices, designed from the ground up to squeeze every penny from a CMS staffed by indifferent “its not my money” bureaucrats.

  • Dr. J

    I think we will continue to see growth in new solo or small group boutique practices where doctors are paid in a fashion much more familiar to the legal profession. I think there continues to be a demand for a form of primary health care that cannot be delivered in any version of insurance paid practice, and there are patients who value this service enough to pay for it.

  • Marc Gorayeb, MD

    Small dental practices, small legal practices, small accounting practices. There’s no reason in theory why small medical practices cannot succeed. However, the economic model of the industry must be aligned with the small medical practice business model. Patients will need to start exercising skin-in-the-game consumer choice, and medicine will have to divorce itself from all third party payors.
    This can still happen. First step is to kill Obamacare, promote free choice in health insurance (such as HSA’s), put individual insurance on the same tax-advantaged footing as employer-subsidized insurance, develop a system of subsidized high-risk insurance pools for those with catastrophic illness, and demand transparency in physician and hospital pricing. The free market can moderate prices and find value, if we let it.

  • ninguem

    I think of the Partners story in Massachusetts.

    When I read the papers, I’m not hearing much about their success because of efficient practice. I do hear stories of how they have been able to extract higher payment for their services.

  • Doc99

    The third party payor system has gradually eroded the doctor-patient relationship since its inception. All this “change” will grease the skids. Since the patient is no longer the client, the ethical issues have grown exponentially.

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