Say hello to Obamacare’s latest technocratic gimmick — the Accountable Care Organization (ACO).
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The first of these federally-chartered Pioneer ACO groups of healthcare providers just recently launched. Proponents of ACOs claim that the new entities will help doctors and hospitals better coordinate care in order to improve the health of Medicare patients and reduce costs.
Don’t count on it. Instead of helping doctors and patients to make individualized treatment decisions, ACOs will empower government bureaucrats to consolidate healthcare providers into top-down organizations and dictate how care is delivered — at greater cost.
According to Obamacare’s supporters, ACOs will streamline communication among doctors and thereby result in more effective care for patients.
Providers will be paid not according to the number of procedures they perform but according to the quality of care they deliver. So doctors and hospitals will have a strong incentive not to repeat tests or perform procedures that don’t improve patients’ health.
The theory underpinning ACOs was based on the success of a small number of highly coordinated health systems like the Cleveland Clinic, the Mayo Clinic, Intermountain Health and the Geisinger Health System. Each of those organizations was once touted by Obamacare’s backers as a model for ACOs envisioned by the federal reform law.
But all four have chosen not to participate in the initial 32 Pioneer ACOs launched this year, because the bureaucratic burden of following Obamacare’s 696 pages’ worth of new regulations is just too high.
According to a letter written by the Cleveland Clinic to the Department of Health and Human Services, the rules are “replete with prescriptive requirements that have little to do with outcomes” and “detailed governance and reporting requirements that create significant administrative burdens.”
A top official at Geisinger echoed the criticism, calling the regulations “problematic” and noting that the rules seem “to be very prescriptive and restrictive with a fair amount of administrative and regulatory oversight.”
So the ACOs aren’t about delivering better care. They’re about empowering the federal bureaucracy.
And they won’t save money as intended, either. According to the Congressional Budget Office, ACOs will reduce Medicare spending by about $4.9 billion between now and 2019.
Annual Medicare spending is already north of half a trillion dollars and is projected to rise to more than $920 billion in the next decade. So the savings from ACOs amount to less than 1 percent of the entitlement’s expected expenditures over the period.
And unless there are changes made to reduce costs, the program’s Hospital Insurance Trust Fund will be bankrupt by 2024, according to a report last year from the Medicare Trustees.
Some experts believe that ACOs won’t yield any savings at all. Last fall, Federal Trade Commissioner J. Thomas Rosch warned that the overall result of ACOs may “be higher costs and lower quality health care — precisely the opposite of its goal.”
How’s that? In many cases, “coordination” will amount to “consolidation.” And by encouraging consolidation through ACOs, Obamacare may end up giving health providers greater market power. Facing less competition, the newly-formed ACOs will be freer to hike their prices. And consumers will be left with fewer healthcare choices.
Indeed, as University of California, Berkeley health economist James C. Robinson reported in a paper last year, “hospitals in concentrated markets charge significantly higher prices to private payers than do their peers in more competitive markets.”
And the consolidations have already begun. Back in 2010, St. Louis University health and antitrust expert Thomas L. Greaney warned, “The new law is already encouraging a wave of mergers, joint ventures, and alliances in the health care industry.”
Since then, the trend has grown, with the total value of the top 10 hospital mergers and acquisitions coming in at $5.6 billion in 2011, up from $3.8 billion in 2010.
More bureaucracy. Higher prices. Worse care for Medicare patients. The American people should hold Obamacare’s ACOs accountable for inflicting major damage on our healthcare system.
Sally C. Pipes is President, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute. Her latest book is The Pipes Plan: The Top Ten Ways to Dismantle and Replace Obamacare (Regnery 2012).