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| Ezekial Emmanuel Predicts the End of Health Insurance Companies! Is the Sky Really Falling? |
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by Douglas Cassel M.D. - February 7, 2012
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Reports of my death are greatly exaggerated
attributed to Mark Twain
A professor of mine at Harvard was fond of saying “Nonsense with a Harvard degree is still nonsense”( sanitized for publication). A recent New York Times editorial by Ezekial Emanuel and a Harvard professor predicts the end of health insurance companies. For many of us in the industry, this is a scary notion, as it will also mean the demise of medical billing, utilization review, and most practice management companies. They boldly predict that their latest bright idea, the “Accountable Care Organization” will replace the present fee for service model completely, and change the entire nature of how medical care is delivered. As you might guess, I beg to disagree.
Accountable care organizations(ACO) were dreamed up by the writers of Obamacare in reaction to the failure of their prior panacea, the Healthcare Management Organizations(HMO). For those with short memories, HMO's were doctor groups that offered care at a predetermined price, assuming some of the risk. They negotiated with hospitals and drug companies to deliver the needed care. Although a few, such as Kaiser have been successful, most were not. Unless these entities could cherry pick patients to avoid the sick ones, they could not render care profitably. Those less clever HMO's that were stuck with the sick and old patients had much higher costs, and responded by rationing care. Needless to say, patients were unhappy, many HMO's went out of business, growth stagnated, and comedians got an unending source of jokes.
To fix the problem, the “geniuses” who wrote Obamacare decided to include the hospitals. They assume that adding another level of administrators and profiteers to the equation, and restricting the number of patients to 15,000, would solve all of the problems. By setting incentives to keep people out of hospitals, the writers predict that costs will be kept down, and care improved. They could not be more wrong. In fact, I suspect that almost none of these ACO's will be profitable, and many will fail, potentially leaving millions without access to care.
What the ivory tower authors fail to understand is the nature of medical risk. When your pool of patients is 15,000 a few patients requiring liver transplants, a flu epidemic, or a cohort of obese patients with diabetes, can break the entire budget. Incentives to restrict care by for-profit hospitals will be even more severe. Not-for-profit hospitals have few reserves, are often unable to substantially reduce expenses, and could face large losses. Furthermore, doctors need to be paid, and will be unwilling to work for sub-market payment for long. Physicians have a long history of losing out in the negotiations required to set payment rates, and have not forgotten how HMO's pressured them to render sub-standard care.
As a result those ACO's with poor patient demographics will fail economically, bringing down hospitals, disrupting practice patterns, and leading to large number of patients without providers. The chaos that will ensue will be remarkably disruptive on our healthcare system. Fortunately, it is unlikely to happen. I predict that ACO's will not only meet the extreme resistance they are already encountering, but will fail financially from the start. I hereby will place a bet of $1 to anyone who will take it that Emanuel is wrong, and by 2020 it will be ACO's and Obamacare that are extinct, and health insurance companies still be going strong, and making us all angry.
http://opinionator.blogs.nytimes.com/2012/01/30/the-end-of-health-insurance-companies/
Doug Cassel was an interventional Radiologist for 25 years, serving as the Head of Interventional Radiology at Hoag Memorial Hospital in Newport Beach, CA. Doug was Chairman of the Board of Healthcare Management Partners, a revenue cycle management company specializing in Radiology, and presently is a Board Member of Zotec, a national revenue cycle management and software company specializing in Radiology, Anesthesia, and Pathology groups for both hospital and outpatient centers. He also serves on the board of Vericle, a software and office automation company. He is a graduate of Yale, Harvard, and Stanford. Find this and other blog postings at: http://www.medical-billing-blog.com/.
The viewpoint expressed in this article is the opinion of the author and is not necessarily the viewpoint of the owners or employees at Healthcare Staffing Innovations, LLC.
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