The HMO in Your Future

Are you in an HMO? If you are a senior on Medicare don’t be too quick to answer. You may be in an HMO and not know it. And if you’re not in one now, odds are you soon will be.

Just two weeks ago, the Department of Health and Human Services announced that 2.4 million Medicare beneficiaries have been enrolled in a new type of HMO called an Accountable Care Organization, or ACO. But here’s the rub. In most cases the beneficiaries have no idea that it’s even happened!

It’s all part of health reform (ObamaCare). For the past few months the federal government has been quietly and secretly enrolling millions of elderly and disabled people into ACOs without their knowledge or consent.

By quietly I mean that the government isn’t telling you about it and it has no plans to tell you about it. By secretly, I mean the whole procedure is being conducted under the radar screen. I know of no place you can write or call or go online to find out what ACO you’ve been assigned to.



Listen,
Do you want to know a secret?
Do you promise not to tell?

What do I mean by a new type of HMO? I’m not talking about Medicare Advantage plans that currently count one in every four seniors as members. Medicare Advantage plans compete in the marketplace. They don’t get enrollees unless seniors voluntarily decide to join. No federal bureaucrat is able to enroll you in one without your knowledge or approval.

As I explain in my new book, Priceless: Curing the Healthcare Crisis, ACOs are HMOs on steroids. Like the traditional HMO, doctors in ACOs will have financial incentives to withhold care (something the American Medical Association used to consider unethical). In most cases, they will get to keep part of any money they don’t spend. What makes them different from the traditional HMO is that they will be under intense pressure to practice medicine according to guidelines written by people you will never meet or see.

For example, Medicare has announced it will start paying more to hospitals that follow a dozen procedures, including administering antibiotics prior to surgery and anticlotting medication to heart attack patients. It will pay less to hospitals that don’t comply. The same thing is about to happen to doctors. Those who comply on up to 194 different metrics — including adopting electronic medical records — will get higher fees. Those who resist will get lower ones.

These are examples of a much larger trend: Washington telling the medical community how to practice medicine. Even though a recent study finds little relationship between the inputs Medicare wants to pay for and such outputs as whether the patient gets well or lives or dies, and even though the latest pilot programs show that paying doctors and hospitals for performance doesn’t improve quality, we are about to usher in the era of big brother medical care.

As an example of what might happen, some private sector plans already reward patients with lower copays if they receive care from the physicians who have higher quality and efficiency designations (e.g., like one or two stars). Physicians can lose a star for allowing more money than budgeted to be spent on patients.  Dr. David McKalip highlights his own experience:

When I was first rated by the program…I was denied a second star because I allowed more than $17K to be spent on a patient over six months who needed advanced cervical spine surgery to relieve their pain or spinal cord compression. The spending by OTHER doctors, physical therapists, radiologic tests and the like was counted against me since I was called the “anchor.”

That is an arbitrary number based on an episode treatment group where the patient has a budget over about six months that the insurance company expects to spend. This basically imposes capitation on my practice though I never signed up to be “at risk” for the patient.

The patients will be steered away from my practice.

To be fair, a lot of medical practice these days is haphazard and mediocre. Doctors don’t do everything they should do. They do a lot of things they shouldn’t do. Medical practice guidelines that serve as a handy checklist can be an aid to good medical care. As I explain in Priceless, however, the danger is that high-quality medicine will take a back seat to “cookbook medicine.” That’s what happens when the checklist substitutes for the doctor’s best judgment. It’s what happens when the checklist becomes the master rather than the servant.

That’s why the most recent survey of doctors finds that almost half think the new guidelines will be bad for patients. That’s twice as many as the number who think patients will benefit.

One of the real ironies in all of this is some of the outlandish rhetoric that has surrounded every attempt to reform Medicare in a reasonable way. Many Democrats in Congress have attacked Paul Ryan (R-Wisc.) and the House Republicans for trying to “destroy” Medicare by “privatizing” it. Yet every Democrat who voted for the Affordable Care Act (ObamaCare) voted for a much more radical and dangerous form of privatization.

The Republican plan would rely on competition and would give seniors choices — including the choice to remain in traditional Medicare. The Democratic supporters of ObamaCare, by contrast, voted to herd seniors — without competition and without their knowledge or consent — into private sector health plans that have perverse financial incentives to withhold care.

To be fair to the Democrats, I think most of them had no idea what they were voting for when they were pressured to vote for the health reform law. As Nancy Pelosi explained, “we have to pass the bill so that you can find out what is in it.”

We are all beginning to find out.

Comments (14)

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  1. Madeline says:

    This is scary.

  2. Devon Herrick says:

    I don’t really understand how HHS thinks ACOs will work to improve quality while lowering costs. The concept is that hospitals need to work more closely with doctors — radiologist, surgeons, primary care providers and so forth. The payment will — at some point — be bundled. The problem is that hospitals responded by merely buying physician practices and employing the doctors. Hospitals essentially are integrating vertically but still face no competition on price. In other industries, this makes sense because producers are completion on price. But in health care, many experts believe vertical integration will increase hospitals’ bargaining power at the expense of taxpayers — and patients.

  3. dennis byron says:

    Please double check your “secret” “without consent” comment and possibly modify.

    Although I agree with your analysis of the stupidity of kicking 7,000,000 Medicare beneficiaries off Medicare Part C HMOs (the predicted result of PPACA according to CBO), putting them back on FFS Medicare, and then moving them into ACOs (which are really just HMOs), I don’t think it’s done in “secret” and “without consent.”

    At least with the Pioneer ACOs here in Massachusetts, seniors were informed and were given a choice whether or not to share their information (see http://www.partners.org/Assets/Documents/For-Patients/ACO/ACO_Beneficiary_Notification_Letter_Website.pdf). I suppose you are technically correct that they cannot choose to opt out of the ACO but if they are choosing not to share their information (and they can go to any doctor or provider they want), what’s the difference?

  4. Brant Mittler MD JD says:

    John,you are correct, and I have written on this blog before these ACOs will be run by hospital administrators who have infinite power over doctors through the peer review/quality assurance process. Doctors have little or no ability to fight ousters and reduction in clincal priveges when they try or do provide “too much” care. Doctors, especially young ones in debt, will toe the line and let sick elderly patients die if their “eprognosis” score is not favorable. Quality assurance nurses will scour every chart looking for leverage points for the administration to get the upper hand on doctors, especially those who buck the system. There will always be a Rita Redberg authored or approved article from the “less is more” Archives of Internal Medicine to support what the administrators want to do. In short, you can no longer trust your doctor. and you certainly won’t be able to trust medical journal editors who always look for which way the political winds are blowing. Not only is Marcus Welby dead, the doctor-patient relationship is dead.

  5. Keith says:

    To be fair, at this point HHS cannot say with 100% certainty that grandpa has been assigned to a specific ACO. HHS can only say that the physician to whom the largest portion of claims for grandpa’s care has been attributed in the past has chosen to participate in a given ACO. The actual assignment will be made retrospectively based on an analysis of claims data.

    Retroactive attribution, combined with incentives for providing government-recommended care, is a simple way to gain near-complete control the practice of medicine. A rational physician, not knowing which of the patients he treats will ultimately be attributed to him, will simply treat every patient as if he or she had been assigned to the ACO, and will therefore follow the government recommendations for all patients. Presto bammo everyone gets the “government-recommended” treatment. Hooray!

  6. Vicki says:

    I like the song pairing.

  7. Stephen C. says:

    This is ominous.

  8. Dr. David McKalip says:

    See the Youtube video Dr. Truth Hurts to fully illustrate the ACO: http://www.youtube.com/watch?v=OW92MP-yyOo

  9. wanda j. jones says:

    John and Colleagues:

    The fundamental flaw in the ACO project is that quality management leads to major cost savings detectible in the insurance premium. No, theyh will not be detectible, as more than 95% of hospital costs are fixed, as are nearly 100% of physician costs (not fees.) Hospitals are only 38% of the healthcare dollar today, so tiny slices of quality improvement will hardly be detectible. In the meantime, the HMO will have hired considerable clerical, nursing and IT manpower to micro-manage care as it is being given, when they used to manage it retrospectively by denying claims.

    I am in a Medicare Advantage plan, and had a cardioversion scheduled, which apparently required approval from the HMO. From diagnosis to treatment was only 3 days, yet the doctor went ahead without approval as the longer one waits, the more likely it is that a stroke may occur while one is in A-fib. The written approval came to me in regular mail three weeks after my procedure. I’m glad I have a doctor who will not be swayed by the craziness.

    Forming these ACO’s is complicated and a risk, yet I know of no healthcare organization that has done a complete business plan and forecast for several scenarios: 1) Suppose we get too many patients assigned and cannot handle them well? 2) Suppose we spend so much money getting ready that it will take several years to recoup it? 3) Suppose there is a backlash from either doctors or patients because of the negative incentives in the payment scheme? 4) Suppose a future patient decides to reverse the drive to ACO’s that were activated in 2014? 5) Suppose we find that our overhead in an acute setting cannot be handled with the revenue from our ACO contracts, 6) Suppose our physician partners decide to go for an ACO contract with themselves as the prime contractor and the hospital as a cost center? and 7) Suppose our health plan partner decides to exit the program because they can no longer be profitable, given the mandates and administrative difficulty of the program? I’m serious.

    This is certainly a time when the very culture and skill level of management will be put to the test, and what no provider organization can afford is to be naive about the possible downside scenarios that will emerge anon.

    Wanda J. Jones
    President
    New Century Healthcare Institute
    San Francisco

  10. wanda j. jones says:

    John and Colleagues:

    The fundamental flaw in the reasoning underlying the ACO project is that quality management leads to major cost savings detectable in the insurance premium. No, they will not be detectable, as more than 95% of hospital costs are fixed, as are nearly 100% of physician costs (not fees.) Hospitals are only 38% of the healthcare dollar today, so tiny slices of quality improvement will hardly be detectable. In the meantime, the HMO will have hired considerable clerical, nursing and IT manpower to micro-manage care as it is being given, when they used to manage it retrospectively by denying claims.

    I am in a Medicare Advantage plan, and had a cardioversion scheduled, which apparently required approval from the HMO. From diagnosis to treatment was only 3 days, yet the doctor went ahead without approval as the longer one waits, the more likely it is that a stroke may occur while one is in A-fib. The written approval came to me in regular mail three weeks after my procedure. I’m glad I have a doctor who will not be swayed by the craziness.

    Forming these ACO’s is complicated and a risk, yet I know of no healthcare organization that has done a complete business plan and forecast for several scenarios: 1) Suppose we get too many patients assigned and cannot handle them well? 2) Suppose we spend so much money getting ready that it will take several years to recoup it? 3) Suppose there is a backlash from either doctors or patients because of the negative incentives in the payment scheme? 4) Suppose a future President decides to reverse the drive to ACO’s that were activated in 2014? 5) Suppose we find that our overhead in an acute setting cannot be handled with the revenue from our ACO contracts, 6) Suppose our physician partners decide to go for an ACO contract with themselves as the prime contractor and the hospital as a cost center? and 7) Suppose our health plan partner decides to exit the program because they can no longer be profitable, given the mandates and administrative difficulty of the program? I’m serious.

    This is certainly a time when the very culture and skill level of management will be put to the test, and what no provider organization can afford is to be naive about the possible downside scenarios that will emerge anon.

    Wanda J. Jones
    President
    New Century Healthcare Institute
    San Francisco

  11. Nancy says:

    This sounds awful.

  12. Paul Nelson says:

    John,

    You always bring such good news to the status quo. I have three questions about the current state of affairs:

    1. How will the community health centers be paid in the future when universal health insurrance becomes a reality? I am aware that a dramatic expansion of these clinics by HHS is currently underway.

    2. Will the Congressional members participate in the ACA transition? I am also aware that the Members of Congress and their staff do not participate in Medicare.

    3. The Gate-keeper HMOs of the 1990’s failed primarily because of the sustained push back from the employer’s management employees. The need to obtain a “purchase order,” aka referral authorization, to see a specialist was a constant source of irritation to upper-middle management. I wonder what the push-back will sound like when a patient’s choice of a physician is systematically ignored: the sound of physician retirement may be the loudest.

  13. John Goodman says:

    @ Devon:

    I agree.

    @ Dennis Byron and Keith:

    Thanks for the clarifications.

    @ Dr. Mittler:

    Thanks for the doctor’s perspective which you so often bring to these discussions.

    @ Dr. McKalip:

    Thanks for the link to the very funny video. I think I have linked to it before.

    @ Wanda Jones:

    Very insightful.

    @ Paul Nelson:

    1. I believe funding for community health centers was part of the ACA legislation.

    2. Memebers of Congress today are in Medicare. At one time federal employees were not.

    3. There will be pushback. Expect an explosion of concierge doctors.

  14. Ian Duncan says:

    I have been doing a lot of actuarial work around setting up ACOs so let me add my comments (I agree with Denis Byron).

    1. Technically, patients have the right not to share their data. The effect seems to be that they are not then an ACO participant. At least the physician cannot manage them without data.
    2. There are some big differences between HMOs and ACOs (which will lead ultimately to their failure, in my opinion):
    a. They can’t do pre-authorization. So providers will be free to prescribe treatment as before. Theoretically the providers will be provided with evidence based guidelines and this will change their behavior. To be seen.
    b. There is no closed network. So a patient is free to get up and go get a requested procedure from a provider down the street. Interestingly if the provider is a specialist the treatment will continue to be the financial responsibility of the ACO physician; how this can be managed is unclear. (See Wanda Jones’s comments). I have spoken with physicians considering ACOs that are already faced with patients who are fully aware of the alternative surgical (= expensive) treatments and who know that they can shop for a physician to prescribe it.

    3. I would be interested in more evidence (like the Michigan article you linked to) that improved quality leads to lower costs. HHS is putting a lot of money behind this initiative without (as far as I can see) compelling evidence (other than “its the right thing to do” (Don Berwick, proprietor)). If this hypothesis were true, the health systems that have provided this type of integrated care for years (Kaiser; Geisinger etc.) would have been able to dominate the market. But they dont.

    4. The first round of ACO implementation seems to aim to save money by changing physician practice. When this doesnt work, stand-by to see HHS impose more true HMO type restrictions (pre-auth; closed networks; non-covered services). Remember that the IPAB stands ready to impose precisely these types of restrictions.