The ACO Game of Wealth, Power and Local Politics

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When the leaders of Wall Street's biggest pharmaceutical companies jumped onboard with the concept of increasing the government's role, scope and power in America's medical industry, they did so with one goal in mind:  the guarantee of tens of millions of additional customers — essentially 'prepaid' with the backing of Uncle Sam. They were riding a wave of national hysteria over a new, charismatic President and calculated that additional customers — even at a steep discount — would be a boon to shareholders. Big Pharma was wrong, and several new CEOs later, they and their shareholders are paying a huge price for such a political miscalculation.

Likewise, physicians who would normally be more 'conservative' politically, but who wanted to  be part of the solution — any solution — cast their votes in mostly silent acquiescence to the American Medical Association's gamble in supporting the Patient Protection and Affordable Care Act. With declining membership numbers that hover around 15 percent of all practicing physicians, and with the loss of over 12,000 members in the year 2010 alone, the AMA is feeling the cold reality of their miscalculation.

For physicians who proffer to be local 'leaders' in their medical communities, the Patient Protection and Affordable Care Act's model for local cost-saving centers called accountable care organizations was an enticing entre to greater influence in their region's medical delivery system. Unfortunately, the reality of these ACOs will pit profit against quality, choice against rationing and Big Pharma against the health system/insurance industry in a way that threatens the very nature of the physician-patient relationship.

The pharma perspective

While Big Pharma could win big under Obamacare, this would only hold true if local ACOs allow brand prescription drugs to remain on formulary. The average physician, however, loses big under any scenario with ACOs due to bundled services and decreased, capitated reimbursement. Meanwhile, local physician board members and medical society leaders stand to profit off of their colleagues' misery as they position themselves at the center of ACO 'medical homes.'

The ACO model will rely heavily on electronic prescriptions and the automated medical record, both of which are mandated, regulated, incentivized (with penalties for lack of use). Under an active ACO, coming to a neighborhood near you soon (if PPACA is not overturned or replaced), health information technology platforms for drug ordering will be stacked heavily in favor of generic drugs instead of brand medications. Although some generics may be 'biosimilar' in their efficacy and effectiveness, some are entirely different molecules with different clinical outcomes profiles. If brand drugs are severely restricted at the level of physician ordering, both Big Pharma (and long-term research and development) and patient care could be significantly impacted.

Big Pharma signed on to the 'Obamacare' way back in 2009, after numerous meetings, including some White House secret deals that involved the President and the CEOs of major drug companies. After legislators passed the PPACA legislation, however, many in the pharmaceutical industry began to express concern that they had made a bad decision. After all, if Obamacare were to derail the economy, and local ACOs took hold, there would be less money for new, expensive (and often superior) brand medications as more emphasis would be placed on generic medicines.

The government has nearly unlimited resources, however, and is doing everything it can to promote the long-term success of the PPACA and local ACO models, even if it costs the taxpayers at double the originally promoted price tag. Recent analyses by the Congressional Budget Office put the price tag for the PPACA law at around $2 trillion dollars.

Healthcare reform reduced Medicaid spending too because Medicaid and CHIP grew by only 0.7 percent in 2010 compared with 6.8 percent in 2009. Again, be careful not to fall for the political gamesmanship here, because the PPACA increased the Medicaid unit rebate amount and extended rebates to Medicaid managed care plans. Thus, federal expenditures on Medicaid grew by 2.5 percent.

Overall, assuming a healthy economy and fair access to brand drugs at the level of local ACOs, drug companies could win under Obamacare, because the new health care law will boost drug spending. CMS projects that annual drug expenditures will double in the next 10 years, to $512.6 billion by 2020.

And, compliments of the PPACA, retail drug spending is projected to grow $35.2 billion (+7.3 percent) higher in 2020 than it would have been without healthcare reform.

The physician perspective

Basically, community-based ACOs will survive by managing sick patients in a "comprehensive" fashion. This will entail having an ethics panel review which patients can have certain surgeries, and have certain plan managers decide if payments to providers should be withheld for 'inadequate' or 'poor' care.  It will also involve deciding how much certain specialty physicians will be paid compared to others in an attempt to save the federal government money (compared to historical, actuarial data). If the local ACO/'medical home' is effective at saving money for a given patient/disease state, it will receive bonuses from Uncle Sam; if not, it will get less money.

In the short run, physicians are set for further decreases in Medicare reimbursement. The Sustainable Growth Rate formula for paying physicians for Medicare services is set for a 27.4 percent decrease at some point if Congress cannot come up with a semi-permanent 'fix' (or, as they have done for years, simply institute another two- to six-month deferment on the rate decrease). Despite the often misquoted 'rewards' for physicians for the utilization of certain performance criteria, e-prescriptions and the like, physicians will face progressive cuts in Medicare pay (on top of the SGR cuts) starting in 2014 and beyond if they do not comply with every onerous layer of new government mandates in practice guidelines.

Thus, many physicians will not be able to sustain their current level of patient care in the near future. According to an Investor Business Daily poll in September 2009, and several polls by other sources since, upwards of 45 percent of physicians may stop seeing Medicare patients altogether or simply retire early.

The bottom Line for physicians

In the end, in typical big government fashion, the health reform movement made a crucial mistake in placing the power of cost-cutting measures in the hands of those who are not actually delivering direct patient care. Big Pharma made deals with the creators of Obamacare, and these deals may or may not end up being successful for the drug companies themselves. Most notably, consumers could end up losing because if needed new drugs cannot come to market due to restricted brand drug availability in local ACO formularies, resulting in decreased revenues and decreased research and development, then future breakthroughs and patient care innovations may never come to fruition.

Likewise, ACOs will be creating hundreds of community-based managed care power brokers, who will pit a select few potential profiteers (local/state medical societies and health systems) against the broader group of medical providers in a local area. If the physicians at the bedside and office setting cannot make ends meet, and thus restrict services/access and close up shop altogether, the community as a whole will suffer.

The better way to implement healthcare reform would have been to do what both Hillary-care and Obamacare both failed to do: Empower doctors themselves to create new ways to increase access and decrease costs and waste. Since the AMA  represents only a minority of community physician members, and has existing conflicts of interest due to tens of millions of dollars annually in federal-protected copyrights on medical billing codes, they were not an honest broker in the PPACA's creation.

The real danger moving forward with the implementation of the PPACA law is that this contentious legislation could be ruled unconstitutional and/or repealed, and yet local ACOs could still survive and continue to live on. This may very well increase costs and waste by allowing middlemen to control, profit and manipulate community medical care for self-serving — not community-serving — purposes.

Adam Dorin, MD, is founder and pesident of America's Medical Society and a commander in the United States Navy Reserve-Medical Corps. He serves as an anesthesiologist at Sharp Grossmont Hospital in La Mesa, Calif., and a partner in the Women's Center and Surgery Center. He attended the University of Maryland School of Medicine and completed his residency training in anesthesiology and critical care medicine at Johns Hopkins University in Baltimore.

More Articles on ACOs:

ACOs Need to Brace For Financial Setbacks
CMS Names First 27 Medicare ACOs
80 Accountable Care Organizations to Know

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