Are ACOs designed to care for grandparents also good for their grandkids?

This op-ed ran in the Boston Business Journal Friday September 2, 2011.

Boston’s Children’s Hospital was recently recognized as the nation’s top hospital for children by U.S. News and World Report. But what will Obamacare and Gov. Patrick’s “Phase II” state health reform, which move the health industry toward so-called accountable care organizations (ACOs) and alternative payment methods, have on world-class medical facilities like Children’s?

An ACO is a network of doctors and hospitals that share responsibility for patient care. In theory, it’s like purchasing a car from a dealership; instead of buying each part yourself, an ACO brings together the different parts of patient care and ensures that the pieces work well together.

Yet the reality isn’t so simple. While ACOs may help improve health care delivery, their complexity should give policymakers pause.

The federal government is pushing our health care delivery system toward ACOs by setting up a program for patients over 65 who are covered under Medicare. Over time, many experts believe, these rules will come to define the broader health care delivery system. But are ACOs designed to care for grandparents also good for their grandkids?

Ninety percent of Children’s business is pediatrics, and Children’s serves the third most patients on public insurance in Massachusetts. For years, reimbursements at hospitals with a sizable number of publicly covered patients have been as little as 60 percent of what private insurers pay.

Acute pediatric care often requires more nurses and different levels of medicine, and it cannot be measured by the same cost and quality standards as adult care. However, current ACO regulations don’t account for these differences. At Children’s, 0.5 percent of patients account for 20 percent of spending. Coordinated care is especially important for this population, but current Medicare proposals do not account for the uniqueness of pediatric care.

There are two ways to “bend the cost curve.” The first is to regulate the market into compliance, but setting reimbursement rates makes it less likely that officials will be able to account for subtle or regional differences in care. The second approach is to create incentives for integrated, innovative service delivery and rewards consumer engagement. This causes fewer economic issues and is much more likely to yield long-term savings.

The goal of health care reform should not be to force all patients in ACOs, but to promote innovation and coordination. Policymakers must not lose sight of that if they want local institutions like Children’s to continue providing the kind of care that has made it a national pacesetter.

Josh Archambault is the director of health care policy at Pioneer Institute. Dan Winslow represents the 9th Norfolk District in the Massachusetts House of Representatives.