ACOs: The End of Independent Practice?

May 25, 2011

Medicare's proposed rules for ACOs raise serious questions. Will it push private practice healthcare toward extinction? And, can services be reduced without reducing the quality of patient care?

Imagine a world where the only restaurants are chains, the only homes are condos with strictly enforced rules, and the only stores are Big Box. What a dreary world that would be, no?

I fear that Medicare's just-released proposed rules for Accountable Care Organizations may be pushing private practice healthcare toward a world like that. Indeed, I worry that ACOs may spell the end of private-office care as we know it. Practices unaffiliated with ACOs may not be able to survive if the healthcare landscape becomes dense with them.

ACOs are groups of providers that are supposed to work together to coordinate patients' care, ostensibly providing better quality for less money by reducing duplicative and unnecessary tests, tracking and reporting on patient outcomes, and working as a team to manage complex patients. Medicare's program would allow ACOs that meet more than 60 care-quality measurements and save money above a predetermined threshold (based on historical data) to keep as much as 60 percent of those savings.

In principle, what's not to love? Better care for less money. But in reality, the only way to save Medicare money is to reduce the volume of billable services providers perform, since that is all Medicare pays for. What Medicare calls savings provider call income. So ACOs can only make 60 percent of what they cost themselves in revenue. Otherwise the program defeats its own purpose.

And can such services be reduced without reducing the quality of a patient's care and his overall well-being? If not, then the ACOs won’t be able to meet the voluminous quality-of-care requirements. If so, then one wonders why Medicare was paying for all those extraneous services in the first place.

And consider that only hospitals and medical groups with at least 5,000 Medicare beneficiaries are eligible for one of CMS's three-year ACO contracts. In reality, ACOs will probably need to be much bigger in order to survive on the razor-thin margins that the "shared savings program" will force. How many markets will have more than one or two ACOs?

Medicare expects ACOs to be more or less invisible to patients. They won't join ACOs the way they might a health plan; CMS will assign patients to their ACO retrospectively based on which primary-care practice they chose during the previous year. It's not even necessary to inform patients of their assignation, CMS figures, since it is merely acknowledging and formalizing choices the patients made themselves.

On one level, that model empowers primary-care physicians. An ACO must have you. It literally can not exist with you. But it also means that primary-care practices are prohibited from participating in more than one ACO at any one time, since CMS can't make its ACO assignment for a patient whose primary care physician is affiliated with more than one. And make no mistake: ACO affiliation would spell the end of your independence. You would be required to refer to ACO-affiliated facilities whenever possible, required to report on the dozens of relevant clinical measures CMS is demanding, required to meet production quotas, and so on.

And while ACOs can’t exist without primary care doctors, in time it may not be possible for primary care doctors to exist without an ACO affiliation. For now, the program is voluntary and affects only Medicare patients. But if it does save money, how long before Medicare decides to begin punishing practices that remain unaffiliated? How long before private insurers decide that they will contract only with ACO-affiliated practices (or only with ACOs themselves)?

How long, then, before choosing a primary-care doctor becomes akin to deciding between Applebee's and Chili's?

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This article originally appeared in the May 2011 issue of Physicians Practice.