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Transparency and "dial tone" to fight market power

Posted Nov 21 2010 9:15pm
Back in August, I raised the question of whether the move to Accountable Care Organizations and capitated payments would lead to market dominance and a resulting reduction in competition in certain geographic areas. The summary of the argument was this
On the one hand, ACOs offer the potential for a better integration of care across the spectrum of primary care, hospitalization, skilled nursing, rehabilitation, and hospice. If the ACO faces an annual budget per patient under a capitated payment scheme, there is an incentive to avoid unnecessary tests and procedures and also to help direct patients to the most cost-effective component of the health care continuum.

On the other hand, if an ACO becomes the dominant provider in a region and especially if it has a electronic health record that is not interoperable with others in the region, that ACO will have substantial market power and will negotiate a higher global payment than would occur in a more competitive marketplace.

Robert Pear raises similar questions in an article in the New York Times. Here are some excerpts
[E]ight months into the new law there is a growing frenzy of mergers involving hospitals, clinics and doctor groups eager to share costs and savings, and cash in on the incentives. They, in turn, have deployed a small army of lawyers and lobbyists trying to persuade the Obama administration to relax or waive a body of older laws intended to thwart health care monopolies. . . . . . . Consumer advocates fear that the health care law could worsen some of the very problems it was meant to solve — by reducing competition, driving up costs and creating incentives for doctors and hospitals to stint on care, in order to retain their cost-saving bonuses.

A related concern was raised by Attorney General Martha Coakley in a speech last week to the MA Association of Health Plans, as reported by Matt Murphy of the State House News Service
Attorney General Martha Coakley cautioned Friday against a "full-scale push forward" on global payment reform to address spiraling health care costs without addressing the underlying issue of market clout that has led to a disparity in pricing among providers without any clear link to quality of care.

. . . [S]he has directed her staff to resume its effort of examining the health care market in Massachusetts to study models of care delivery and the associated costs.

. . ."A shift to global payments by itself is not the panacea to controlling costs," Coakley said. "Implementing payment reform without addressing the market leverage issue outlined in our report is like trying to fix the roof on a house without fixing the flawed foundation."

Because anti-trust regulatory action is often ineffective against market dominance, we should focus on self-reinforcing policy initiatives to mitigate against this possibility. Here are two suggestions.

The first is one mentioned often on these pages: Total transparency of rates paid by each insurance company to each provider. In Masachusetts, a good first step along these lines was taken by the Legislature and Governor Patrick this past summer. Only when subscribers can see the actual rates being paid will there be the moral force to ensure that rates are reasonably related to factors other than market power.

The second idea is a simple as dial tone: Complete interoperability of medical records among providers. As long as proprietary electronic medical record systems exist, a given provider network can control the degree to which patients can choose lower priced or higher quality doctors and hospitals outside of that network.

Instead, we need the equivalent of the "magic button" described in this post by our CIO, John Halamka, demonstrating interoperability between our hospital and Atrius, the state's largest multi-specialty practice:

By working with Epic and Atrius, we enabled a "Magic Button" inside Epic that automatically matches the patient and logs into BIDMC web-based viewers, so that all Atrius clinicians have one click access to the BIDMC records of Atrius patients.

If this capability existed among and between all provider systems, consumer choice would be possible. Without it, a dominant network will remain dominant.
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