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Are bigger health-care networks better or just creating a monopoly?
"We tend to be attractive to [doctors] with a different kind of personality," said chief medical officer Mark Werner. "You'll never get into it if you're someone where it's 'all about me.' "
But some local doctors have resisted Carilion's overtures, producing a rift in the formerly collegial community. In 2006, dozens of doctors and employers formed a group to protest Carilion's ambitions. And last year, they cheered when the Federal Trade Commission forced Carilion to sell an imaging center and ambulatory surgery center it had bought because the purchases would result in higher prices.
Independent doctors say Carilion is urging its employees to refer patients only to providers within the Carilion network, cloaking its expansion in the lingo of health-care reform.
"Now, they say, 'ACOs, that sounds good, let's graft onto that,' " said radiologist James Blackwell. "But the germ of the idea was really, 'How can I get a bigger system with more control, without all these fractious doctors to deal with?' "
Whether Carilion's sway has inflated costs is a matter of dispute. Colin Drozdowski, vice president of insurer WellPoint, says Carilion's rates are "among the most expensive" in Virginia. A state database, however, shows that Carilion charges more than average for only a handful of common procedures.
Carilion officials counter the monopoly charge by noting that there is a 500-bed hospital in Salem, adjacent to Roanoke, owned by the national health-care chain HCA and that only half of family physicians in the Roanoke Valley are employed by Carilion. They argue that the real problem is consolidation on the insurer side, where WellPoint's Anthem controls most of the market.
Murphy, Carilion's chief executive who earned $2.3 million in 2008, acknowledges that providers holding excessive leverage over insurers is cause for concern but argues that ACOs can be a corrective.
"If [leverage] is not addressed forthrightly by the provider community, that's going to come back to bite us," he said. "But . . . that leverage has already gone on for years."
Concern over spending
Underlying the debate is a broader one about health-care spending. The new health-care law reflects the view of many experts that the problem lies in overuse of care -- when providers are motivated to do unnecessary procedures by the "fee for service" payment system. This camp says the system should encourage doctors to receive a salary instead of being paid piecemeal and reward them for reducing the need for costly procedures. In that regard, the ACO model resembles HMOs, except that the coordination of care is led by providers, not insurers.
"This is a path to giving doctors and health professionals more resources for doing what they think is right for patients," said the Brookings Institution's Mark McClellan, who ran Medicare under President George W. Bush.
But another group of health economists says that by many measures, Americans do not use medical care more heavily than people in other developed countries. The real difference is that people in the United States pay much more for the care they get.
Expanding networks might allow providers to cut back on unnecessary care, this group says, but the savings could be canceled out if the networks drive up prices. The answer, they say, lies in reducing providers' leverage -- perhaps with a Medicare-like "public option" for people younger than 65 that could push for lower prices or by public rate setting of hospital prices, as is done in Maryland.