HCI3 Update from the Field: ACA is Here to Stay

Submitted by francois.debrantes@hci3.org on Friday, November 9, 2012 - 02:11

Newtown, CT – November 9, 2012

One thing is certain now, the ACA is here to stay – and that means the move by Medicare and Medicaid towards value-based payments will continue to accelerate, and with it, the needed transformation of the incentives that power today's behavior of the delivery system – to always produce more services. However, we must also guard against the second foe of health care affordability, the inexorably higher pricing of health care services by the increasingly consolidating provider market – which is something that Medicare spends very little time worrying about. As Topher Spiro, Emily Oshima and Zeke Emanuel point out in a recent Annals paper, price and use are not mutually independent variables, and FFS encourages providers (and suppliers) to produce more and charge as much as they can for each unit of service, especially if they can get away with it. And on that note, last year a series of papers were published as part of a symposium on the effects of hospital mergers . These, along with more recent work by Berenson and Ginsburg, offer significant evidence that market consolidation is a recipe for price increase. That consolidation is actually accelerating, partially in response to the ACO craze, in which most of the national plans have been seemingly happily engulfed. Once again, the pied pipers are leading us off the pier and into the bay of pigs…chum for the trough.

What this means to you – As Rob Burns and Mark Pauly state eloquently, it's unlikely that the current ACOs will avoid the failures of the IDNs of the 1990s. That's because nothing much has changed in the intervening years. It's not as if a new batch of health system CEOs coming from other industries have taken over and are ready, willing and able to apply the lessons from true transformation that have reshaped retail, telecommunications and pretty much every other economic sector. The folks in charge, in health plans and health systems, have pretty much all grown up in the flawed industry in which they now practice. And so the same failed tactics are simply being re-applied with a new varnish. For example, some plans are making deals with ACOs to reduce co-pays and co-insurance on plan members that voluntarily lock-into an ACO….sound familiar? Didn't they realize the last time that creating opposite incentives for consumer-patients (reducing cost of accessing services), and providers (penalizing the production of services), led to the backlash? Seemingly, no. And so here we go again. Let's encourage consolidation (which will lead to price increases), slap on a global cap, and set the patient against the provider. So when it blows up again, we'll be left with no global caps and a highly consolidated market. Unless…
We have an opportunity to avoid these pitfalls, and it starts by creating a real market for health care services. With full transparency of price and quality, ability for consumer-patients to seek care where they want, and shop, like they do for other services. Of course, that might mean that the "secret sauce" that some claim to have is uncovered for what it really is: a purposefully opaque and dense fog. The pipers are only pretending to lead us out of that fog, so stop listening to them. You can choose instead to listen to some sound advice from the folks at KPMG, who join many others now building a real market. Or become chum. Your choice.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org