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ACO Final Rules Intend to Encourage Consolidation

Philip Betbeze, for HealthLeaders Media, October 28, 2011

Never mind that significant investments are necessary to even begin to participate in ACOs. Will that money and effort pay off? It's certainly not clear that it will. So thank you, they say, for listening, but we'll still pass.

Smaller hospitals and health systems may have little hope of gathering the necessary firepower to take on risk, especially when patients—and physicians, according to the revised rules—can move in and out of the system to provide and obtain care. That's a problem, again, for the big systems. The problem for the smaller ones and the standalones is that they can't even afford to obtain the size and scale necessary to make a real effort at ACOs.

It's these organizations that are really at a crossroads at which either path seems treacherous. Clearly, reimbursement is moving in the direction of accountability, whether through government payers or commercial ones. Should healthcare leaders decide to stay the course, and not participate in ACOs or other risk-bearing contracts—and above all, stay independent--they might face a slow march toward oblivion. Their concern is that the trip may be much quicker if they decide to try ACOs.

So, what we have left is consolidation. Many standalone hospitals are attractive targets for larger systems that have the firepower to survive an expensive, uncertain experiment. Others aren't. This is no fantastic revelation, however, it's easy to imagine leaders at these organizations whistling through the theoretical graveyard, and hoping it might all just go away.

This is a fight for survival, even if survival means being taken over by bigger, better funded organizations that can afford to make mistakes. ACOs are a great common-sense idea. But most leaders can't afford to blow up their current business model in order to try something that might sign their organization's death warrant.

That's the problem with risk. It's too risky.

Philip Betbeze is senior leadership editor with HealthLeaders Media.
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1 comments on "ACO Final Rules Intend to Encourage Consolidation"


R Daniel King (10/28/2011 at 3:51 PM)
Accountable care organizations will fail without accountable leadership starting with government. Five decades of Medicare and Medicaid price controls have caused all the negative characterisics of price controls: shortages (primary care physicians), excess (cardiologist), black marketing (drugs), organized crime (fraudulent billing), assault on civil liberties (a physician's freedom to charge a patient less than Medicare), lesser quality (IOM and HealthGrade reports)and the big one infalation. Historically, price controls cause universal inflation but cost shifting allowed Medicare to shift its inflation private insurers. Consequently, insurance premiums inflate at higher rates than Medicare making CMS look inefficient and private insurers inefficient and/or profit mongers. If "ACOs are a great common sense idea," then you have to accept bundled price controls will not fail where fee-for-service price controls did. The root cause to the US health care crisis is the leadership chasm at all levels. If we do not come to terms with this, a British op-ed will prove right, "the US will need to manage its decline." Health care leaders can either accept this or find the courage to usher in the goldern age of health care by becoming the force behind the most efficient delivery of quality, universal, integrated care. Government has failed to do this for half a century.