Cleaveland: Why health care costs so much

Cleaveland: Why health care costs so much

April 21st, 2011 in Life Entertainment

A physician's answering service directs all after-hours callers to the emergency room. Assessment of a non-urgent condition costs hundreds of dollars. A three-day hospital stay for questionable reasons costs almost $50,000.

Many ER visits and hospitalizations are unnecessary. Poor coordination of medical services and needless testing relentlessly drive costs upward. Higher costs do not assure better quality.

Control of runaway medical costs is a major goal of the Affordable Care Act of 2010. The legislation provides funding for accountable care organizations (ACOs) as one means for attaining better care at a lower price.

ACOs are modeled after health plans that have functioned effectively for years in various parts of our country. Systems developed by Inter-Mountain Medical Group of Utah, Kaiser Permanente Health Plans, and Mayo Health System are notable successes.

ACOs are scheduled to become operational in January 2012. The Department of Health and Human Services issued regulations for ACOs in late March. Initially, the enterprises will offer care to Medicare recipients.

An ACO will consist of a coordinated network of hospitals, physicians, clinics and home health and long-term care providers. Each network will provide comprehensive health care services to a minimum of 5,000 Medicare patients within its geographical area.

Formation and enrollment in an ACO is entirely voluntary. An ACO can be established by health insurance companies, hospitals, physician groups, or a combination of the three. Brisk efforts to form ACOs are underway in most states.

Each ACO will be monitored for quality of care and attainment of specific goals related to safety, disease prevention, chronic disease management, and patient and provider satisfaction. Providers will receive standard Medicare payment plus a bonus based upon savings and attainment of specific clinical goals. Supporters contend that ACOs will save almost a billion dollars in their first three years of operation by reducing wasteful, ineffective practices.

ACOs that fail to meet standards of clinical performance will not receive bonuses and can be dropped from the program.

ACOs will rely upon readily accessible, electronic medical records which require substantial investment. Organizational costs are high initially as separate businesses are combined and learn to work with each other. Coordination with the Federal Trade Commission and other agencies is essential.

Unlike health maintenance organizations (HMOs), patients in an ACO will be free to obtain care outside their network without penalty should they become dissatisfied with their care. This should motivate ACOs to be efficient and patient-friendly.

Supporters of the ACO concept predict that the new entities will attract individuals and businesses beyond the Medicare population. ACOs could gradually supplant the fragmented health care system that dominates most of our country.

Ideally, each ACO will incorporate principles developed by the Patient-Centered Medical Home Collaboration (PCMH). This group represents major employers, health insurance companies and health plans, professional provider organizations, consumer groups, and labor unions. From its founding in 2007, the PCMH has worked across the spectrum of its members to promote, respectful quality care while containing costs.

A PCMH is structured around a health care provider who coordinates and monitors all aspects of medical assessment and treatment which a person needs. Among the goals of a PCMH is anticipation of medical problems so that unnecessary, high-cost visits to emergency rooms can be avoided. Disease prevention is emphasized. Close monitoring of chronic conditions such as diabetes mellitus, high blood pressure and rheumatoid arthritis avoids complications which might otherwise result in hospitalizations.

If ACOs are operated solely for profit, they will fail. If they are carefully designed, the prospects for safer, more effective, and less costly care are substantial.

ACOs merit a careful trial. Meanwhile, the critics of the ACA propose no comprehensive alternatives.

E-mail Clif Cleaveland at