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Accountable Care Organizations: The End of Innovation in Medicine?

Gottlieb- Scott-150
Scott Gottlieb

By Alan Lyndon

In his latest Health Policy Outlook, American Enterprise Institute (AEI) health policy expert and practicing physician Scott Gottlieb takes a look at accountable care organizations (ACOs) which are being touted by the Obama administration as a cost-cutting option and a key part of health care reform.

Among Gottlieb’s key points:

  • The ACO concept — where a group of doctors, or more likely a hospital, is given responsibility for a large number of patients and gets to keep a share of reimbursements based on its ability to reduce spending and improve outcomes — is not new. Similar ideas have been tried before, but have failed because the groups were unable to control costs or manage medical risk.
  • ACOs offer financial incentives to cut costs, but also restrict patient choice and limit the use of some expensive care.
  • While the Obama administration envisions ACOs as drivers of health care innovation, over the last several decades most notable innovations have come from private sector entrepreneurs with venture capital backing.

In 2010, Obama’s former health care czar Nancy-Ann DeParle wrote in the Annals of Internal Medicine that “the health care system will evolve into 1 of 2 forms: organized around hospitals or organized around physician groups. These coordinating functions, to the extent that they currently exist, traditionally have been managed by hospitals or health plans. Only hospitals or health plans can afford to make the necessary investments in information technology and management skills.”

In his outlook, Gottlieb states that “the prospect that hospitals will soon own a majority of medical practices in the United States is already worrying some doctors and policymakers.”

He continues to say that “many of the provisions of the Obama plan, especially the way ACOs are being envisioned and constructed, push the entire market precisely in this direction. In the meantime, private investors are exiting health services and entrepreneurs are putting their energies into other endeavors. These marketplace developments, more than anything else, make the Obama plan’s reliance on public financing and central planning self-fulfilling and–in the end–make the entire scheme self-defeating.”

Click here for the full text of Scott Gottlieb’s Health Policy Outlook.

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