The Obama administration on Thursday outlined a new approach to medical care that it said could mean higher quality and less risk for patients, while also saving millions of dollars for taxpayers.
The plan involves accountable care organizations, which are networks of hospitals, doctors, rehabilitation centers and other providers. They would work together to cut out duplicative tests and procedures, prevent medical errors, and focus on keeping patients healthier and out of the emergency room.
"We need to bring the days of fragmented care to an end," Health and Human Services Secretary Kathleen Sebelius said as she announced a proposed regulation that defines how the networks would operate within Medicare.
If things work out, medical providers would share in the savings. If the experiment fails, they're likely to get stuck with part of any additional costs.
Sebelius said early estimates are that Medicare could save as much as $960 million over three years. That's not a whole lot for a $550-billion-a-year program, but officials say it's a start. The estimate was prepared by Medicare's office of the actuary, known for its independence.
Eagerly awaited by the health care industry, the new approach was called for in President Barack Obama's health care overhaul. The first networks would open for business next year.
Unlike some managed care plans, such as health maintenance organizations, these networks would not lock in patients. "The beneficiary has not lost any choice at all," said Medicare administration Donald Berwick.
The U.S. spends about $2.5 trillion a year on health care, more per person than any other advanced country. Yet people in the U.S. lag in some common measures of health and well-being. Researchers estimate that as much as one-third of U.S. spending goes for services that aren't really needed, and that's what the networks are supposed to address.
If the idea succeeds in Medicare, it is expected to spread quickly to employer-provided health insurance. Already in some parts of the country, such as the Minneapolis area, insurers, hospitals and doctors have set up similar networks for privately insured patients.
But there are risks.
The networks could end up costing more money because of the intensive work involved in coordinating among different providers. Medicare recipients now may see four or five different doctors, who never talk to each other or compare notes.
There's another potential problem. What if a network of hospitals and doctors acquires monopoly power in its community and starts raising prices? Assistant Attorney General Christine Varney said the administration won't allow that to happen.
"We believe there is no area of the economy that can benefit more from collaboration than health care," said Varney. "Those who collaborate to fix prices inappropriately will be prosecuted."
Doctors, hospitals and other service providers will decide whether join a local network. They will have to make a three-year commitment to care for a group of at least 5,000 patients.
The Justice Department said providers that control less than 30 percent of the market for a given service in their community probably would not face scrutiny for possible anti-competitive concerns. Those with a market share of 50 percent or more would undergo a mandatory review before their network could be approved. For those in between, the department issued a list of things to avoid if they don't want to face questions from the government.
Once the government has approved a network, Medicare administrators will monitor performance on costs and quality. If the network succeeds in saving money over what its patients' care would have otherwise cost, Medicare will share a portion of the gains. If it loses money, providers could get stuck with a bill.
Providers are required to let their patients know that they are part of an accountable care organization and to get permission to share personal health information within the network. The experiment is focused on traditional fee-for-service Medicare.
"We are committed to getting the details right," said Sebelius. "The rules we are proposing today are just the first step in a long process."
It's unclear what would happen to the experiment if Obama's health care law is overturned in court or repealed.
"I've never seen a time when there was as much positive work being done, although we don't have enough statistical data to show results yet," said Jim Eppel, a senior executive of Blue Cross and Blue Shield of Minnesota, which has several networks of its own. "I think providers in our area have come to the realization that they need to reduce their cost of doing business. This provides a platform for them to do that.