ACOs, Acquisitions and Mergers: Do These Business Plans Really Save Patients Money?
Accountable Care Organizations (ACOs) are groups of physicians, hospitals and other health care providers, grouped together to provide care to a specific group of patients (1). The Center for Medicare & Medicaid Services (CMS) states that the goal of ACO development is to ensure that patients get the appropriate care at the correct time, reduce medical errors and reduce duplication of services. CMS believes that ACO’s will reduce spending and increase cost efficiency for patients.
Medicare offers several ACO programs:
- Medicare Shared Savings Program — a program that helps a Medicare fee-for-service program provider become an ACO
- Advance Payment ACO Model — a supplementary incentive program for select participants in the Shared Savings Program
- Pioneer ACO Model — a program designed for early adopters of coordinated care.
However, the Pioneer ACO Model is no longer accepting applications (1). Health care ACO’s have already transformed the way they deliver care in many ways. In some cases, participating in an ACO is purely voluntary for physicians and surgeons. In other situations, ACO participation is mandated by hospital administration. Many ACO’s were initially developed to create networks of primary care groups. Bundled payments for various diagnosis related groups (DRG) of patients were created along with promises of increased payments if specific care or cost-related goals were met.
Merging to be Successful
Acquisitions of smaller hospitals, absorption into larger hospital networks and mergers of hospital systems has become vogue in the past two years. In fact, according to the New York Times, “In a fast-paced financial version of musical chairs, health care companies of all kinds — drug makers, hospital groups and insurers — have been frantically circling to be sure they are not left out of the latest frenzy of deal making. Mergers and acquisitions worth about $270 billion have been announced in the first nine months of 2015 in the U.S., easily outpacing the activity in recent years, according to a tally by Mergermarket (2).”
According to the proponents of these mega-mergers, large hospital networks will effectively reduce cost for both patients and the CMS. Hospitals continue to merge in order to capture a larger market share of patients. For example, in July 2015, Barnabas Health and Robert Wood Johnson Health System in New Jersey announced plans to merge. Theoretically, this merger would create the state’s largest hospital network, comprised of 11 member hospitals (2).
Go Big, or Go Home?
Physician group and hospital mergers are just the tip of the iceberg. Pharmaceutical companies and insurance providers are also jumping onto the “merger wagon” with promises of cost reduction, enhanced savings and elimination of waste. But is bigger really better?
I would argue against the continued blind permissive to “acquire and merge” rampant among physician groups, hospitals, pharmaceutical and insurance companies. There are many reasons why, which are listed below:
- 1. The Titanic Dilemma: too big to change course quickly.
Mergers and acquisitions almost always involve some sort of restructuring of the organization with new levels of responsibility and oversight that may not have previously existed. While some duplicated departments and functionalities may be merged, others may be eliminated completely. Effective and fair consolidation of services or groups is a difficult process that does not occur overnight. I have observed mergers occurring, and for years, after the administrative and legal changes have been announced, physicians and patients are still left wondering, “What’s going on?” Often there is confusion about administrative roles and responsibilities, care pathways and other processes. Changes necessary to avoid complications and/or reduce costs and improve patient safety become difficult to implement because of the multiple layers of complexity and various responsibilities. Decisions made in one hospital may not be embraced, or even as effective, at their “sister” hospital. Processes that work well in one region may not be as operative in another area. I have seen this happen in New Jersey, and hospitals that once provided excellent care grew too fast, and therefore, patient care began to suffer.
2. Monopoly is a game without many choices.
Fair trade and competition require an open market. When smaller hospitals are forced to join other hospitals, or close, and mega-monopolies develop, our choices in healthcare become limited. Socialist and communist countries often provide free healthcare to citizens; however, there is no choice of provider for the patient. There are no options. As a consequence, waiting lists develop and health-care providers become shift workers trying to work in as many patients as possible.
The Veterans Administration (VA) is a sad example of monopolized healthcare. “A former scheduler told the Inspector General that in 2010–2012, she was aware of at least six patients who died while awaiting care at White River Junction VA Hospital (3).” The senior administrators at that VA Medical Center are being accused of attempting to cover up huge delays in care which may have caused death in several patients.
I am not the only individual concerned about these mergers and acquisitions. “In a rare move, Massachusetts Superior Court Judge, Janet Sanders, recently blocked Partners HealthCare—Harvard’s affiliated 10-hospital conglomerate and Massachusetts’ largest private employer—from acquiring three competitor hospitals. Judge Sanders argued that the expansion ‘would cement Partners’ already strong position in the health-care market and give it the ability, because of this market muscle, to exact higher prices (4).” This threat is even greater in when the monopoly does not provide expedient quality care, and they are the only hospital in town.
Obamacare has created a MEGA-MERGER MONSTER. “From the perspective of the insurers and patients, between 2009 and 2012, hospital-owned physician organizations in California incurred higher expenditures for commercial HMO enrollees for professional, hospital, laboratory, pharmaceutical and ancillary services than physician-owned organizations. Although organizational consolidation may increase some forms of care coordination, it may be associated with higher total expenditures (5).” Why are you NOT surprised? This study of more than 150 hospital-owned and physician-owned organizations found that patient costs are 19.8 percent higher for physician groups in multi-hospital systems compared with physician-owned organizations. Continued mergers and acquisitions are not going to control costs. Instead these monopolies will be allowed to drive costs higher. There is no accountability, no ultimate responsibility, no ownership of the patient or the process. It is communist health care at its worst.
- 3. Patient care is NOT the goal.
None of these changes are helping patients. Electronic medical records (EMRs) and Health Information Technology (HIT) are two prime examples of well-intended concepts or ideas that had the potential to really make a positive difference until the government got involved. There were mandates to develop, install and employ within EMR systems well before these software applications were ready. Billions of wasted dollars, millions of wasted employee hours and incredible and uncountable errors have occurred because of premature deployment of these applications. GE Centricity, Epic, McKesson and many other EMR databases that were forcibly introduced into our clinics and wards have failed. This does not mean that they should be abandoned. We needed more time to develop these programs. We learn from our mistakes, and we adapt. But in hospitals, when you just start “doing something” without adequate beta testing and debugging, patient care suffers. We have all seen our EMR’s fail. We have seen errors in drug prescription and dosing, and we have been frustrated by the lack of interaction and “cross-talk” among different software applications within a single hospital system.
“Five years after the Affordable Care Act helped set off a health-care merger frenzy, the pace of consolidation is accelerating, transforming the medical marketplace into a land of giants. The trend is under a new spotlight now, as Congress zeroes in on the competitive and cost impact of proposed deals that would collapse the health-insurance industry’s top five players into just three massive companies, each with more than $100 billion in annual revenue (6).” Health care insurance companies are merging so they can increase the return on investment (ROI) for their shareholders. They are not merging so they can provide better plans for patients or more reasonable reimbursement for physician services…please! When will the American public realize that healthcare insurers should NOT be allowed to function as FOR PROFIT companies? This is a HUGE conflict of interest.
We have witnessed huge ACO’s buying up failing medical and surgical practices that were doomed to fail because of their inefficiency and disorganization. The larger and more successful practices have avoided being absorbed into the hospital ACO system because they have the ability and power to stay independent. Those practices have adapted to changes in healthcare so they can still function in a fiscally sound manner. When entire departments are comprised of failing practices, there is almost no chance that the department will succeed in providing effective, safe, compassionate and cost-effective care to patients.
I am opposed to the continued rage of mergers and acquisitions among physician groups, hospitals, pharmaceutical companies and insurance companies. This process will continue to degrade and destroy our health-care system as it exists today.
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