Barak Richman: ACOs should not involve collaboration of rivals

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Barak Richman Duke law professor antitrust ACOThe Centers for Medicare and Medicaid Services will soon release a proposed rule that defines accountable care organizations in far greater detail. To get a better sense of what kind of proposals might or might not get the green light as ACOs, FierceHealthcare recently checked in with Barak Richman, a Duke Law professor (pictured) who specializes in health policy and antitrust issues. His recent article, published in this week's Journal of the American Medical Association, looks at the dangers of allowing rivals to horizontally integrate as ACOs.

FH: What are the biggest misconceptions about accountable care organizations?

Richman: Maybe the biggest misconception is that we know what we're talking about when we talk about ACOs. We think that the Kaiser model needs to be expanded. We're going to call it an ACO, because we think accountability characterizes the advantages of the Kaiser model. But we really don't have anything specific in mind when we think of ACOs.

Maybe this is a related misconception. This is not just a simple extended hospital model. This is not just hospitals linking up with local primary care physicians. In fact, if that's all that's created, it'd be an enormous disappointment, a hugely missed opportunity.

What we really want to see from ACOs are creative organizational forms, real innovations to the delivery system. We want to see the reorganization of care. We want to see physicians thinking in innovative terms about what patients really need. We don't have a lot of that.

FH: Why do you think ACOs could easily become monopolies that accumulate market power? What conditions make that possible?

Richman: Well, it's because people misunderstand what ACOs are. Maybe that's an even bigger misconception about ACOs. Some people think ACOs are a license to collaborate with their rivals. It's a license for the two radiologists in town to cooperate. And that is not at all what ACOs are supposed to do. It's actually the antithesis of that.

The ACOs are not about horizontal linkages, that is linkages between competitors. ACOs are about vertical linkages, linkages between individuals at different points of the delivery system.

If ACOs create horizontal linkages, if they reduce competition and give license to collusion among people who should be competing with each other, then that's a really big problem. We already have a too much market power concentration in healthcare that severely injures both the affordability of care and the quality of care.

If ACOs are interpreted to give license to these horizontal linkages, then they would pervert what is otherwise a very good idea.

FH: What will the Department of Justice and Federal Trade Commission need to look at when evaluating proposed ACOs by doctors and hospitals to ensure antitrust laws are enforced?

Richman: The biggest thing they need to make sure of is that the ACOs do not increase market power. The only real question is whether they're going to enforce it or not.  Based on that New York Times article, it looks like the [Federal Trade Commission] recognizes the real dangers of not enforcing the antitrust laws in this area. And I really hope that view prevails in this administration.  

FH: Do you think the ACO concept is even viable? Is it possible to have old rivals collaborate without leading to a consolidation of market power that could raise costs for consumers?

Richman: As a simple matter of economics, it is not possible for rivals to collaborate without increasing prices. Whenever rivals cooperate, there's an increase in market power and an increase in prices and a decrease in competition. In some cases, there's a decrease in quality too. The ACO concept is very much alive especially if rivals are prohibited from collaboration with each other.

The natural inclination for much of the healthcare system is to collaborate with rivals. That tendency needs to be combated. The ACO idea is about pushing providers into areas that they're uncomfortable with. It's decidedly about doing business a different way. In fact, that's a quote from Don Berwick. It's not about doing business as usual. Proposals for ACOs that do not change the way the delivery system is organized are not going to be approved to be ACOs.

FH: What would be a problem?

Richman: What would be a problem is if the only kinds of proposals that providers offer are collaborations with rivals. What we really need are proposals that vertically integrate delivery. That doesn't require involving hospitals. We should be most optimistic about ACO proposals that are further down the delivery chain that just involve primary-care physicians or primary-care workers alongside social workers--the kind of integration that will really help patients navigate through the delivery system.

This interview was edited and condensed.