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Sunday, January 13, 2013

Too Big to Fail ?


The following is a transcript taken from Google Plus "+Health Care Tallk Community

+Mark Browne +Kathi Browne +David Harlow +Mark Taber discussed the proposed ACO movement.     Perhaps I am  jaundiced as far as government inspired modifications to Medicare and organizational imperatives. In 1964 when Medicare began physicians almost unanimously opposed Medicare, not because it was government insurance or intrusion into the healthcare market, but because physicians knew an inflow of federal dollars would fuel increases in healthcare spending.  Physicians knew that modeling the payment system whereby 80% coverage of patient cost created an  ability to bill more and  fueled much of the medical device development.A little known feature of the original Medicare reimbursement was the payment rate was tied to the usual and customary charge of physicians;

New physicians originally set ther reimbursement rate by increasing their charges when they first began in practice.  Often times new physicians would receive higher Medicare payments as compared to established physicians. Physicians and hospitals in the private sector could now offer healthcare to seniors who prior to this had no coverage unless it was included in their pension plan. Uninsured seniors would depend upon the public hospital system.  In 1971 contracting became  legal with passage of the HMO law and prepaid contracting. It took about ten years and by 1981 PPOs and HMOs were epidemic.  Many HMOs went bankrupt and providers were left 'holding the bag'  In many cases local or regional managed care plans were formed with a withhold of 15% or more administered by small groups. This mechanism allowed capitalization of the small entities, using withholds meant to be paid back to providers, and instead used to line pockets when the smaller managed care entity was   bought by much larger entities. Providers were duped by a relatively few unscrupulous organizers who came away with windfall profits.

Other control mechanisms were put in place, such as prior authorization, and Medicare’ switched to allowable charges.

Regardless of these governing actions medical inflation became even worse, far outpacing the increase in GDP overall,

ACOs likely will go the same way as margins dip to near zero and perhaps into the negative numbers. Hospital boards and ACO management will follow the prevailing wisdom, when solvency is threatened. Sell, or merge. The next step within five years will be mergers and outright purchases  of ACOs

The trail leads to government intervention and bail outs of health entities, 'too big to fail".  Sound familiar? Where have we heard this before?

I hate being right about these inevitabilities. Truth is, getting larger does not mean more savings.

I have given in to my worst fears in the middle of the night..

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