Health Care Blog Coverage of Law School Conference

Dr. Yes
David Dranove
The Health Care Blog
October 22, 2012

Last week I attended a conference on health policy at the University of Chicago, where I moderated a panel that examined implementation of the Affordable Care Act. For much of our time, the panel focused on Accountable Care Organizations. Panelists and attendees wondered whether ACOs would meet the same fate as Integrated Delivery Systems of the 1990s. Some in the audience mentioned that when it comes to integration, electronic medical records could be a game changer. EMRs could be used to monitor and reward cost saving decision making, for example. But most ACOs are still figuring out how to use EMRs for clinical decision making; their use in helping managerial decision making remains far off.

As more and more speakers expressed skepticism about the future of ACOs, a physician in the audience offered a truly fresh perspective, one that makes me feel much more optimistic. I never learned this physician’s name, so I will call him Dr. Yes. Before I summarize Dr. Yes’ argument, it is helpful to turn back the clock to the late 1990s, when IDSs were taking the health industry by storm. Perhaps the defining feature of IDSs in the 1990s was the integration of hospitals and primary care physician practices. This strategy failed in large part due to classic agency problems. In a nutshell, an agency relationship can fail because of incentive problems (the principal is unable to effectively motivate the agent) or selection problems (the principal employs the wrong type of agent.) IDSs suffered both. When hospitals acquired physician practices, they converted entrepreneurs into employees who resisted any kind of incentive payments. As employees, primary care physicians did not work as hard or show as much commitment to their practices. Moreover, those physicians most eager to give up their autonomy were those looking to dial down their practices and lead the “quiet life.” In these ways, IDSs experienced both incentive and selection problems, with devastating results.

According to Dr. Yes, today’s physician is totally different from the physician of the 1990s. And those differences bode well for ACOs. Without mincing words, he said that today’s physician is fed up with private practice. Physicians face uncertain Medicare reimbursements and enormous pricing pressures from private insurers. They are told that they have to demonstrate quality but lack the data systems to do so. Solo and small group practices are virtually nonexistent so most physicians are already parts of large organizations. And patients with large deductibles are turning the physician/patient relationship into a business relationship. Dr. Yes might have added that the majority of new physicians have vastly different expectations about lifestyles and incomes than the previous generation. In the 1990s, medicine was being transformed into a business. Today, it is a business.