Why physicians may not buy into ACOs

I’m sure Ezekiel Emanuel hates being referred to as Rahm Emanuel’s brother, so I won’t describe him as such. After working as one of Obama’s main health care advisors, he’s now at U-Penn in a job spanning medicine, economics, and ethics. He’s also been writing engaging essays in JAMA about health care reform and economic change, that give us an augur into where health care reform might lead us.

Here, Dr. Emanuel answers the question, where do our 2.6 trillion health care dollars each year actually get spent? On the way, he’d like to refute some myths you may have heard about where major costs can be squeezed out of the system. First, the myths:

  • Malpractice costs: Nonpartisan Congressional Budget Office estimates say that aggressive tort reform in all states would reduce costs by only 0.5% per year ($11 billion).
  • Insurance company profits: Profits from the 5 biggest insurers were only 0.5% of health care costs.
  • Drug costs: Switching to Canadian sourcing and maxing out generics would only get us $3 billion / year.
  • “Million Dollar Babies”: About 10,000 adults and kids use more than $1 million/year in health care costs; that’s $10 billion. Dropping the threshold to $250,000/year gets you ~$169 billion to work with. This is where rationing would start, but no one wants to be on the first death panel.

Doing all these things together might get you $15 billion to $20 billion, he argues, but it’s a haphazard approach. I would add, the political theater surrounding attempted changes at any of these levels would be absurd and outrageous, limiting their success.

Where is the money, then? It’s in the 10% of the population with chronic diseases, who consume 64% of health care expenses. In other words, the patients we see day in, day out, who fill the clinic and hospital O.R. schedules (and make their cash registers ring).

The solution, Dr. Emanuel reminds us, is embrace of accountable care organizations and capitated disease management systems as the only way to reduce these patients’ frequent hospitalizations, preventable errors and readmissions. Rather than complaining, we physicians need to get organized and take a leadership role to make this new era of high-quality, low-cost health care happen.

Dr. Emanuel, I’m all for it. I believe you, and I’m ready for wholesale change of our broken and bankrupt “system.” But then again, I don’t have a private practice whose steady income is paying my mortgage, retirement fund and kids’ education. After making the rounds of practicing pulmonologists over the past few months, I can tell you that they are going to foot-drag and fight any change in their practice-and-payment habits with tooth and claw. From what I hear, other subspecialists feel the same. Given that these docs in small retail practices still represent a large majority, the kind of cheerleading in this essay is disconnected from reality. Besides, in what fashion are these small-scale docs expected to organize? They have no bargaining leverage with corporations, little organizational infrastructure, virtually no capital reserves or margin for error, and no clue what’s expected (since no one does, right now).

Small physician practices will join ACOs when insurance companies and the government force them to do so to get paid (which incidentally would require someone actually forming one so we see what an ACO is), or when the financial incentives involved are a no-risk giveaway. What middle-aged docs are really banking on is that the time horizon for serious restructuring can get stretched out to their (early) retirements — and they’ll do whatever they can to slow down this particular hope and change.

Matthew Hoffman is a fellow in pulmonary and critical care who blogs at PulmCCM.org.

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  • http://twitter.com/PulmCCMCentral PulmCCM Central

    Dr. Ezekiel also blogs at NYT.com and recently put a post up about ACOs here: 
    Talk about cheerleading. This is a sales pitch to the public, as opposed to the sales pitch to MDs in JAMA. Nowhere in the piece is the inevitable physician resistance mentioned as a barrier.
    The “asteroid” coming as he describes it is the insurance companies essentially becoming the ACOs. They will have to bring more MDs into their pocket (i.e. employment) to do it.
    Direct employment of physicians is the missing link to implementation and one that you will not see mentioned directly in these articles.
    Either by large hospital systems or insurers, directly employing physicians will allow their behavior to be standardized (i.e. controlled) and permit implementation of ACOs. This process is well underway.
    You’re right, until that happens (old-school independent docs retire) ACOs will not happen or succeed.
    notice he refers to 2020 as the Utopia/Doomsday timeline. It will take longer, but it’s true that many more older physicians will be retired or bought-up by employers by then.

  • Narayanachar S Murali

    Any successful physician or surgeon buying into ACO is a fool because it will result in decimation his practice and serious loss of income with no job security. Such docs are essentially accepting the risk for the covered population without even knowing the risks involved. You work for your income and livelihood. By joining an ACO they will be working for the income and livelihood of the administration and its minions. People who  smart enough to be a docs, unless really  lazy, ought to be billing and collecting proper payment for their services. In an ACO the aim is meeting certain indicators and numbers and keeping the cost down for the admin. ACOs are risk transfers from insurance companies to physicians! No other profession will accept this nonsense.
    If on the contrary a practice is doing poorly , mostly due to physician incompetence, such docs ought to rush into joining an ACO. There they are perhaps going to be sheltered and protected by the slightly more median competence and can refer wildly between specialists in the group. .They also get a chance to be darlings of administration by being appointed  to steering committees and attending boardroom meetings in three piece suits.

  • http://www.bryantsstatisticalconsulting.com Donald Tex Bryant

    Suppose that the future holds medical services being controlled through primary care physicians!?  A couple of weeks ago the Wall Street Journal pointed out that Aetna and WellPoint are going to begin paying PCP’s organized as Patient-Centered Medical Homes substantially more for services–up to 10% I believe.  I have no doubt that these two insurers will do all they can to see that their clients and customers adopt PCMH care, especially those with chronic illnesses.  This will happen all the more if there are findings that this approach to providing care is cost effective to the insurers.  CMS is also studying this in pilot studies.  In the end, if this approach is widely adopted, then the purse strings will be under the control of PCP’s, I believe.  Then, it would seem prudent for specialists to join an ACO or other organization that would tie them more closely to PCP’s.  I have been hearing this scenario from many presenters at medical conferences recently, as well as in media such as WSJ.


    • Anonymous

      You are right, Donald, if primary care physicians can actually refer less (and have their patients demand less) specialty care and provide better care so patients do not get into the revolving door syndrome with hospital admissions and ED visits.  Delaying the onset of ESRD even 5 years in patients with diabetes would save tremendous $$ (it has been proven; not much incentive to do the hard work at this point), and other conditions could reap similar rewards.  Too much attention to gathering the “low hanging fruit”; time to get the ladder and reach the top of the tree!  That’s where the real savings are!

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Dr. Emanuel is right on one count though. Physicians in private practice need to organize. Most existing associations are not representing the interests of independents any more, and the AMA certainly does not.
    You guys need to come together across specialties, across geography, across petty bickering over RUC and who gets paid more, and stand up for what you know is right, not just for doctors, but mainly for patients. People will support  you, if this is not just another anti-ACA, Obama-bashing, for-profit effort. But someone needs to get up and do it in an organized fashion.
    Very few physicians are happy with their medical associations. Many stopped paying dues. This is the perfect time to start something new, something relevant and something that cannot be ignored or bought by politicians and special interests. The opportunity window is very small and this is going to be an uphill battle, but I think it’s worth it and I think it can succeed, because Americans are not as stupid as “experts” seem to think.
    And just to put my proverbial money where my mouth is, I would happily volunteer significant time and expertise to help such organization get off the ground.


      Margalit, I agree wholeheartedly: physicians should get organized by creating an organization to represent us other than the AMA, whose interests have become too conflicted and convoluted. In fact, there are some who argue that through their monopolistic control of the CPT codes and Physician Masterfile (access to which is their primary source of revenue, not physician dues) the AMA is directly responsible for the “commoditization” of doctors’ work, with the associated inexorable pressure to standardize and reduce cost-per-work-unit. (See: http://tinyurl.com/7fq3mw3 )

      It’s strange, and yet telling, that not only has such a movement not already happened–it isn’t even in the whispering, backroom stages of developing (or if it is, I haven’t been invited to the smoke-filled room).

      Established private practice physicians have been doing things the same way for a long, long time. It’s working less and less (for them and everyone else) — but as I alluded in my post, it’s still lucrative and predictable, even with declining payments. Most of these docs have significant financial obligations at their stage of life, and have no incentive to take risks, certainly not by joining an ACO (see Narayanachar Murali’s post below). 

      The bottom line is that practicing MDs want control: control over their work environments, over their schedules, and over their incomes. To a large degree, and far moreso than in other professions, they’ve had that, for decades. Organizing into a collective group would mean giving up some of that control. (“Herding cats” is an apt expression that gets thrown around a lot.)

      The closest thing I’ve seen to physician “organization” outside the AMA is the social media community Sermo, founded by the physician Daniel Palestrant. He blogs at HuffPost at: http://www.huffingtonpost.com/dr.-daniel-palestrant — However, Sermo is (more than anything else) a place for physicians to commiserate and vent frustration, rather than a forum for planning meaningful action. Palestrant has recently founded a new market venture called par80, which sounds exciting, but they have yet to announce their product(s) and business plan.

      So, we cats are still waiting for our cat-herder. Whoever it is had better be ready for a few scratches.

    • Anonymous

      Isn’t this type of organization declared illegal because we (doctors) cannot have any form of collective bargaining?  We need to change the law before we can exhibit a forceful voice in our own future.

      • http://onhealthtech.blogspot.com Margalit Gur-Arie

        This is not about collective bargaining. This is about representation and a public voice that is free of special interests. An organized effort to make the voice of practicing doctors heard which will make it impossible for “experts” to discount as just another manifestation of old age or technophobia or greed.
        Personally, I would nominate Dr. Steven Reznick for the job :-)

    • Anonymous

      Have you considered joining the UAPD? It’s a tough labor union that’s been representing doctors for more than 30 years. Oh, I forgot! Republicans are trying to pass right-to-work legislation at the state level all across America. The GOP says unionism is like socialism and like communism. Yeah, right! The GOP says we should not be “forced” to join unions. Forced? Who gets “forced” to join a union? Where does that happen? The GOP says we should be more like Mississippi and Alabama. Both states are at the bottom of the per capita income scale. Sorry if I offended any Tea Baggers out there.

  • Anonymous

    I would like to know what percentage of referrals to specialists could be eliminated if primary care physicians could have longer visits (with higher reimbursement to allow for that).  And also what other support systems in primary care clinics could help get patients care earlier on in their disease process (i.e., not wait end organ damage to start seriously controlling blood glucose levels and blood pressure).

    • Arvind Cavale MD LLC

      I am not sure this will help. Specialists (especially cognitive type) provide unique services that PCP’s cannot, simply due to lack of specific training, knowledge and experience.

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Dr. Hoffman, Sermo has made its fortunes by selling pharma front seats to watch physicians interacting in their natural habitat. I have no illusions that the new venture will not also be seeking profits from doctors or “secondary” data sources.

    You need an organization that is not there to enrich any individual, whether an MD or not. You need an organization to represent independent doctors.

    Industrialized medicine is not any cheaper than small practice, quite the opposite is true. I seriously doubt that large facilities provide better quality of care, although they have the money and resources to spin out survey after survey. Patients prefer high-touch medicine.
    It should be a no-brainer to win the public over, because this insane drive to “bigger is better” for organizations and “less is more” for individual care makes absolutely no sense. With today’s technologies (yes, EMRs), there is no advantage to consolidation ala Henry Ford.

    I find it peculiar that there are no people willing to stand up and be counted amongst the “fiercely independent” crowd of our “best and brightest”…. I would wager that one small spark would light up the forest….

  • Narayanachar S Murali

    What is an ACO?
    Let us start with an analogy so that consumers who vote for the politicians who
    come up with bright ideas understand why doctors hate ACOS.

    Consider this analogy, Government mandated  “Beach Homeowner’ Association” that
    generally used to just handle neighborhood upkeep and common area maintenance.  Think of the president of the beach homeowner’s
    association as the Administrator of the hospital and the office bearers as the
    administrative minions, the home owners as physicians in ACO.
    The insurers suddenly decide to Pay the Administrative division
    of home owner association an annual sum of money to cover all salaries and
    ALL repairs following annual hurricane
    disasters and be responsible for satisfaction of all homeowners and their extended family. The insurance companies are allowed by law to demand the higher premiums adjusted to
    the risk, add  annual inflation adjusted
    raises from all homeowners. The administrators  have a rider that the administrative staff of
    the homeowner’s association cannot suffer a pay cut and any losses should be
    absorbed by homeowners( physicians) .  They are also prohibited from paying less to workers ( taxpayers) who come to repair beach mansions after hurricane.  Now you know where this is leading. If you are
    a homeowner and have a choice of joining the “Beach Homeowner’s Association”,
    would you join?

    So the first answer doctors and patients  need to demand from Berwick, Anne De Parle ,
    Obama Ezekiel Emmanuel,  Sabelius, Hilary
    Clinton and their ilk is to demand they clarify “Accountable to whom” and
    explain how it is going to help physicians or patients.

  • http://www.facebook.com/theYogadr Kathleen Summers

    Most chronic diseases are preventable (and often treatable) by a change of lifestyle. Oncologists at MD Anderson recently wrote that even 9 out of 10 cancers (the second leading of cause of death in the US) are preventable. The answer to decreasing the amount of money spent on health care is not in how we pay doctors, but in how we create a cultural revolution – one that educates, motivates, and facilitates lifestyle change – and helps people to see through the marketing schemes for unhealthy products and ridiculous “health” services.

    Let’s focus on empowering people and communities to understand how food and behavior affect them, creating inspirational programs for change (because it’s so hard to do does not mean it is impossible), and building “homes” where healthy food, exercise programs, health education, and mental health support are available to all.

    If we’re all going to be mandated to purchase health insurance, let’s mandate that the health insurance companies pay for that kind of accountable care home. Their financial incentive to make it work will increase the chances of success. In the end, their bottom line will rise, healthcare spending will decrease, and best of all, Americans will be happier and healthier.


      No question, significant cultural change is what we need. The “cost curve” everyone talks about bending just might closely parallel the “obesity curve” — now above 33% of U.S. adults, and rising. Of course, obesity isn’t to blame for all health problems, but it does correlate with diabetes incidence, and on a population level it might be a proxy for chronic disease in general. I absolutely agree that over the long term, lifestyle and culture changes, especially changing the way Americans eat and move (toward less and more, respectively) will be key to reducing health care costs.

      The problem is, unlike the Arab Spring revolutions, that one will take decades. And I have to say that although the idea sounds great, forcing insurance companies to fund “homes” (not sure how these would look) and making healthy choices, services, and education more available will solve the problems, either. Workplaces, governments, and insurers could and should create environments and incentives to make it easier for people to avoid bad choices. Food policy is the most obvious target here. But the unpleasant truth is that most unhealthy people already have sufficient access to nutritious food and a place to walk outside every day, arguably all that’s needed for most. They just don’t choose the more difficult path to good health (not to mention that >20% still smoke).

      The problem of chronic disease (and medical care generally) is so huge, and so intertwined with culture (food means fun and family; smoking is social), politics (i.e., food policy, battles over health reform), and ethics/morals (personal responsibility), that it’s near-impossible to get your arms around it. And of course, each area for improvement in the big picture has its constituency whose income would be threatened by change.

  • Anonymous

    This is such a pile of erroneous assumptions; I’m not sure where to begin. I guess I will start at the top:
    Malpractice costs would be difficult to estimate and are likely underestimated in this assumption. The entire way medicine is practiced: from the tests you order, to the way you document, to the frequency of visits would be changed. Nobody bothers to address tort reform…so I guess we will never know. Not sure I would trust the CBO on anything. We can see where congressional budgeting has gotten the country. 
    Insurance company profits only refer to the money that these companies rip off and shove in the pockets of investors. This does not include outrageous salaries, overpriced business dinners, golden parachutes, master suites at hotels and all the other wasted administrative costs incurred by people whose sole mission is to profit off of denying people care. Those are “business expenses”.
    As for drug costs: It is not just a matter of switching to generics. There are tons of really expensive medications that are being prescribed that barely work at all. The prices of these medications can rarely be justified. And since there is no such thing as a medical market place it is simply a question of what the market will allow…the one that does not exist. 
    Rationing may start with the “million dollar babies” which hopefully refers to insurance company CEOs, pharmaceutical company CEOs, medical policy wonks and hospital administators. I think people would show overwhelming support for rationing for that crowd.
    And so ACOs are supposed to solve all this? From a prior post: “Accountantable to whom?”.
    “Small physician practices will join ACOs when insurance companies and the government force them to do so to get paid ”
    And isn’t that what medicine is all about? Government and insurance company forces?


  • Anonymous

    Reforming our eating culture is critical to reforming our health care.  This would be the biggest savings.
     It is both what is out there for us to eat and what we choose to put into our mouths. The % of people smoking was greatly reduced by taxing tobacco products, putting a message on the packages, cutting subsidies, and preventive measures – the tax had the greatest effect.  Cigarette smoking becomes an addiction.  Eating processed sugar, too much fat (particularly corn fed and processed vegetable oils), and salt becomes an addiction.  So… it follows that we need a  tobacco model applied to all potentially
    addictive substances.  

    We need to stop “bundling” chronic diseases.  If determined by their major risk factor they could
    be divided into: chronic: 1) preventable – (diet, alcohol, tobacco smoking) 2) unknown 3) genetic, 4) accidential.  

    What “diseases” are in that “bundle” of million dollar babies?  Kids with Leukemia, transplants,
    what others? And what is the break down of costs? How sad that a country would allow such rationing/ denial of care at all and then to change reasonable policy about discussions on end-of-life choices a “death panel”.  

    BTW – The stated $169 B saved by capping at $250,000/yr was not correct. It is $7.5 .

    Not knowing what all goes into developing these numbers given by the author from Dr. Emanuel and assuming they are understated the savings could be estimated at $38 Billion and forget about messing around with the million dollar babies.  Sacrifices? – some lawyers, high paid management, big pharma sales.  As a tax payer I can live with that..

    It still remains however that 60% of health care costs are for “chronic diseases”.  Again, all lumped together.  I would guess however, that the majority fall into the category “preventable”.  This goes back to my original comment that it is here we need to not only come up with another care model such as ACO but to address “what we put into our mouths” – by a RISK tax (Reduction In Sickness)
    on the substances known to be the leading risk factor in these preventable diseases: processed sugars/sweeteners, processed vegetable oils and corn fed animal fats and sodium.  Rough estimates based on $.003/ gram of sugar and fat and 100 mg of sodium would be $100 B/yr put into health care and taxpayer health care credits.  In addition, we need to stop subsidizing unhealthy food while simultaneously giving small farmers more incentives to grow fruits and vegetables than Big Ag would give them to buy them out.  Here are some jobs. It’s happening but far to slow.    

    And add to the “sickness stew” lack of health insurance and health care costs are one of the greatest stressors to people: this stress leads to even more disease – perhaps in a category by itself.

  • Anonymous

    Primary care needs to change. If we are going to lower costs and include more people into America’s health care system, we need to change the initial portal into the system. We need to understand that average Americans can no longer afford to see a highly trained doctor just to remove a wart or get a flu shot. We need to realize that 85 percent of initial visits are in this category. If neurotic hypochondriacs insist upon seeing a doctor for every little thing, they should pay the entire cost out of their own pocket. 

  • Anonymous

    The computation for tort reform is wrong, bi-partisan or not.  It doesn’t account for defensive medicine which everyone practices. 
    Insurance reform is needed.  Competitiion in the insurance market.   Let me buy policies where three companies keep prices high b/c they have a monopoloy. 
    Mr. Emmanuel is pushing ACOs which are just another form of HMOs–a smoke screen to make rationing more palatable.  The only way to really reduce costs is to limit access to care and in the end that limits our society’s abundance of its most important resource, which is healthy, productive  human capital.  What we should be working on is keeping people healthy and productive, not figuring out who costs more in the healthcare system.  This money is a good investment.  I have yet to see a cogent argument that health is not the most important commodity we have as a society.
    As for the sick infants that we save (and other countries let die), well, I take care of them and over 30 years I have seen many who should have died or been non-productive, become special and important contributors to our world. 

  • Anonymous

    Oh, one more thing.  Let’s start to become accountable for our own health–lifestyle diseases are killing us all and breaking the bank.  And it starts earlier in childhood.  I had a 112 pound 3 year old in my OR 2 weeks ago.  The family didn’t see it as a problem.  And that’s only the beginning. 

  • Anonymous

    The doctors that really need to worry are in primary care. They are the traditional Marcus Welby types that have have been on cruise control for the past few decades and have not kept up with our changing times and with the mood of health care consumers. If you are a doctor in primary care, you are in a dying field. Why? It’s way too expensive! The VA does primary care with mid levels at a third the cost and they have rules about prescription medicines. At the VA, you do not get a brand name drug if a generic is available. On top of that, the VA negotiates with drug companies for the best price. Medicare doesn’t. If we want to save Medicare and lower costs for our seniors, we should hand the entire program over to the VA and watch them succeed where our private doctors, private insurers and the entire health care industry has failed. Short of handing it over to the VA, our next best solution are big-box ACOs. The Marcus Welby’s need to find another job. That small office model is doomed. 

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