A Thousand Dollars Says Dr. Ezekiel Emanuel Is Wrong About The Long Term Prospects Of ACOs

An inflation-protected bet

Approximately 15 years ago, the Disease Management Care Blog was a speaker at a conference with an audience mostly made up of managed care leaders. It boldly argued the nation's disease management vendors were going to help put the nation's health insurers out of business by simultaneously assuming risk and lowering costs.

Hows that for chutzpah. The DMCB was never invited back, but not because it isn't an outstanding conference speaker who deserves fat fees.

It was because it was utterly wrong.

And so is this online commentary on accountable care organizations (ACOs) courtesy of the The New York Times. In it, Dr. Ezekiel Emanuel boldly predicts that by 2020, ACOs will drive health insurance companies out of business. They'll do that by assuming full risk, dropping patient barriers to care, coordinating services, fostering communication, promoting health, banning fee-for-service, increasing efficiency, relying on evidence-based care, being locally responsive and competing against other ACOs on cost and quality

Dr Emanuel is being astonishingly overconfident for four reasons.

In fact, the DMCB, thanks to years of published evidence, is so sure of the odds that he's wrong, that it is willing to bet Dr. Emanuel $1000 dollars that employers, health insurers and government programs and not providers will control the majority of the U.S. health care budget in 2020. 

If the DMCB is wrong, the money can go to any cause selected by Dr. Emanuel. If the DMCB is right, it gets to select one, like the 2020 presidential campaign of this person.

Here's why the DMCB is willing to put its money where its bloggery is:

1.Pundits have been incorrectly predicting the demise of U.S. health insurance for years. For all its problems, its ability to form huge risk pools, maintain a cushioning surplus and remain profitable has regretfully made U.S. style health insurance the least worst alternative.

Dr. Emanuel naively points to ACO risk pools made up of 15,000 members.  That's way too low and exposes the risk-bearing organization to wide swings in claims expense. As further testimony to the financial vulnerability of ACOs, California has required groups that take risk to maintain a surplus to mitigate the risk of bankruptcy.

2.  Managed care style health insurance and its utilization management approaches persist for one simple reason: it works and, what's more, even MedPAC knows it.

By the way, wasn't it the managed care insurers, not the providers, that invented the enlightened care management and coordination approaches that ACOs are supposed to adopt?  By the time ACOs get that up to speed, the insurers will be developing even newer innovations in areas like social media, gaming and wireless health management.

3. Dr. Emanuel embraces the replacement of fee-for-service by what he euphemistically describes as "a fixed amount per patient." At the height of managed care in the 1990s, that payment approach was called "capitation."

Patients distrust any form of capitation and when doctors aren't being screwed by "decapitation," the disincentives of a fixed payment stream can be problematic. What is it about ACOs that make their secret sauce better than anyone else's?

4. Not only do the low odds of success make the future of ACOs highly murky, many physician-led groups have simply been unable to simultaneously manage the competing business models of saving money and building clinical programs.

And what about quality?  While studies like this suggest integration leads to higher quality, others say the impact is more modest. And where's the proof that quality actually reduces costs?

While Dr. Emanuel may ultimately prove to be right and the DMCB will be out $1000, that doesn't necessarily mean ACO patients will be better off. Provider groups that are successful in managing capitation are just as prone to the bad behavior of insurers that they're supposed to replace.

(To be fair to the future beneficiaries of the DMCB's money, it recommends that it be parked in escrow in an inflation-protect asset class, like gold. That's because if ACOs fail and the U.S. health care budget balloons, the U.S. Treasury will be tempted to print its way out of trouble.)