Accountable Care Organizations: Gag clauses, firing doctors, liability, and profits

Accountable Care Organizations (ACOs), encouraged by the Affordable Care Act (ACA), aka Obamacare, brace for trouble while preparing for profits.

One of the questions we're being asked is whether or not ACOs may impose gag clauses, e.g., if a treating physician wants to prescribe a diagnostic test or treatment, and said diagnostic test or treatment is not authorized or is denied by the ACO, may the treating physician tell that to the patient who has been denied a diagnostic test or treatment? May the cost of the procedure to the ACO be discussed with the employee or patient?

Our initial reaction to reply affirmatively is tempered by our understanding that a recommended study or treatment would have been discussed first with the patient who would presumably already have agreed to it and would know about any non-authorization or denial. But we also observe contract language that physicians are precluded from discussing disagreements about compensation "and other matters" with patients. The treating physician is told in contractual language that where "disagreement cannot be resolved ... under no circumstances shall such disagreement be expressed to the Enrollee."

Contractual language tells the doctors that they may not discuss what the ACO has determined is protected information "to any person ... until such person agrees in writing to be bound by the provisions of this Agreement ..." We take this preclusion to mean that doctors cannot discuss ACO disagreements even with their own lawyers unless the lawyers agree to be gagged!

What lawyer would agree to being gagged before having heard the case?

These gag clauses are reminiscent of the 1990s when HMOs sought to muzzle doctors (see references below).  Both the HMOs at that time and the ACOs as currently construed have contract language that allows them to fire doctors at will. Such power is essential to keeping the doctors in their place, compliant, subservient, and dependent.

The ACO agreements we've seen so far carry both "termination without cause" as well as "termination with cause" clauses.  The latter are often subsequent to what the ACO may have called a "material breach" which is defined by the ACO itself and generally refers to what the ACO calls information that "that compromises the security or privacy" of information considered proprietary or confidential.  Disclosure of this information to patients could be considered a "material breach." That the patient has "right to know" might be a legal defense but it would not preclude ACO management from firing the doctor.

Potential participants, physicians and patients alike, need to understand that ACOs are business organizations selling and dispensing health care services. They are entitled to make profits which they can then distribute to their own business associates as a second source of income in addition to whatever fees have already been paid. One selling point is that ACOs will cut down on unneeded tests and treatment but a countervailing point is that along the way the ACO may deny access to diagnostic tests and treatments with harm coming to patients while participating physicians are not allowed to speak out under penalty of being fired from the ACO.

Questions of medical-legal liability are already being asked: who gets blamed for what if an indicated study or treatment is denied and the patient suffers or dies as a result? Is there liability to physicians who've kept this    information under wraps in compliance with ACO non-disclosure policy?

How will profits and payment to providers, including physicians, be determined? One contract we've  examined says straight out that the ACO will make that determination, e.g., "Physician agrees that decisions (by the ACO, actual name deleted) ... management and other administrative policies and procedures may be used by (ACO) to deny or reduce payment ..."

In essence this language means that whatever fee schedule the physicians signed may be abrogated, changed, or set aside at the will of the ACO. No bargaining or negotiating is  required or encouraged.

All the same "bonus payments" or the prospect thereof will remain in effect. This section of the ACO agreement means that ACOs that actually achieve what they call "savings" will be allowed to allocate a portion of the "savings" to providers as "bonus payments" or additional income, essentially a second source of income, to participating providers. That helps to explain why ACOs will favor primary care physicians as opposed to specialists since it is the latter that usually prescribe expensive tests and the most up-to-date and often most expensive treatment protocols. The "gag clause" will stop timorous physicians from explaining too much to patients about how ACOs work their magic.

ACOs need primary treating physicians to ensure "savings." While specialists with their expensive procedures may be necessary to ensure quality of care, they'll be carefully scrutinized -- call it "economic credentials" (see references below) -- to make sure that they don't have too much impact on profits which the ACOs refer to as "savings." Finally, expect that bonus payments to treating doctors will be limited with the bulk of savings going to the ACO itself and to additional executive compensation.

While the ACO mechanism is more sophisticated than the old HMO methods,  they have in common that the goal is financial gain with as much devotion to patient care as can be accommodated.

HMO References

"Why HMOs want to muzzle doctors," San Francisco Examiner, 4 April 96, by Robert L. Weinmann

"Medical Red-Lining, Economic Credentials for Physicians, 12 January 96, by Robert L. Weinmann

The Congressional Record, Vol. 144, # 118, commentary by Hon. Tom Campbell, R-California, 9 September 98

ACO References

 "A Hospital War Reflects a Bind for Doctors in the U.S.," New York Times, 11/30/12, by Julie Creswell and Reed Abelson

"Covered California's Plans to Become Self-Sufficient," California Healthline, 11/19/12, by David Gorn

"California's Role In Ensuring That the Potential of Health Reform Becomes Reality," Health Affairs, 30, no. 1 (2011): 71-75