Original Scholarship

Transformation of the Health Care Industry:

Curb Your Enthusiasm?
L AW T O N R . B U R N S a n d M A R K V. PA U LY

The Wharton School, University of Pennsylvania

Policy Points:
r Policymakers seek to transform the US health care system along two di-
mensions simultaneously: alternative payment models and new models
of provider organization.
r This transformation is supposed to transfer risk to providers and make
them more accountable for health care costs and quality.
r The transformation in payment and provider organization is neither
happening quickly nor shifting risk to providers. The impact on health
care cost and quality is also weak or nonexistent.
r In the longer run, decision makers should be prepared to accept the
limits on transformation and carefully consider whether to advocate
solutions not yet supported by evidence.

Context: There is a widespread belief that the US health care system needs to
move “from volume to value.” This transformation to value (eg, quality divided
by cost) is conceptualized as a two-fold movement: (1) from fee-for-service to
alternative payment models; and (2) from solo practice and freestanding hospi-
tals to medical homes, accountable care organizations, large hospital systems,
and organized clinics like Kaiser Permanente.
Methods: We evaluate whether this transformation is happening quickly, shift-
ing risk to providers, lowering costs, and improving quality. We draw on recent
evidence on provider payment and organization and their effects on cost and
quality.
Findings: Data suggest a low prevalence of provider risk payment models
and slow movement toward new payment and organizational models. Evidence
suggests the impact of both on cost and quality is weak.

The Milbank Quarterly, Vol. 96, No. 1, 2018 (pp. 57-109)

c 2018 Milbank Memorial Fund. Published by Wiley Periodicals Inc.

57
58 L.R. Burns and M.V. Pauly

Conclusions: We need to be patient in expecting system improvements from

ongoing changes in provider payment and organization. We also may need
to look for improvements in other areas of the economy or to accept and
accommodate prospects of modest improvements over time.
Keywords: value, cost, quality, payment, organization.

M
any observers assert that the US health care
industry is undergoing a transformation from “volume to
value.”1,2 This transformation is said to manifest itself both
in insurer markets as new alternative payment models (APMs) and in
provider markets as new organizational models such as accountable care
organizations (ACOs) and patient-centered medical homes (PCMHs).
(See online Glossary for definitions.)
It is not entirely clear when this transformation began or how much
of a change it was. While the managed care era of the 1990s set the stage
by emphasizing cost containment, the period from 2005 to 2008 seems
pivotal in terms of the change narrative. During this period, the Centers
for Medicare and Medicaid Services (CMS) proposed pay-for-performance
(P4P) as a solution to the sustainable growth rate (SGR) problem in
Medicare. The Commonwealth Fund issued a framework calling for
affordable access to excellent care while maximizing efficiency in its
delivery and administration, and it called for the simultaneous change
in provider payment and delivery to reduce fragmentation of care and
transfer risk to providers.3,4 Michael Porter and Elizabeth Teisberg called
for competition based on “value” (quality divided by cost), the need for
episode-based payment, and the need by providers to transform the way
they delivered care to achieve value.5 Eliot Fisher and colleagues called
for the creation of ACOs based on extended hospital medical staffs.6
And Donald Berwick and colleagues advocated a new set of performance
measures organized around “the triple aim.”7
There are at least 4 implicit (and sometimes explicit) hypotheses
underlying this transformation to value. First, by getting providers to
(1) move away from fee-for-service (FFS) and accept new APMs such
as P4P and (2) reorganize into larger delivery vehicles such as ACOs,
providers will deliver care of higher quality and lower cost. Second,
this transformation is already underway, based on growth in APM
reimbursement and the number of ACOs. Third, the transformation
will lead to more capitated, integrated care delivered by organizations
Transformation of the Health Care Industry 59

Figure 1. Simultaneous Change in Payment and Provider Organization

Global market risk model

Professional services risk model

Provider Bundled payment / episode of illness payment

Payment
Models
Pay-for-performance

Fee-for-service

Solo Hospital Independent Single-specialty Accountable Fully integrated

practitioners medical staff practitioner & care delivery networks
associations multispecialty organizations &
& groups/networks & Kaiser model
physician-hospital medical homes
organizations

Provider Practice Models

resembling Kaiser Permanente and other closed-panel health mainte-

nance organizations (HMOs). Fourth, advocates generally assume that
higher quality goes with lower cost; higher (lower) quality delivered at
higher (lower) cost is a thorny issue less often considered.
These hypotheses are untested, given the slow take-up of these ideas
and the recency of APMs and ACOs. The putative wisdom underly-
ing the transformation narrative also has not been critically examined.
This article evaluates whether the transition is (1) happening quickly,
(2) shifting risk to providers, (3) leading to higher quality and lower
cost care, and (4) inevitable. We also consider forces that may oppose or
attenuate transformation, and other approaches to cost containment and
quality improvement.

Transformation in Health Care

The dictionary defines transformation as a profound change in form in the

life history of an organism—eg, from a tadpole to a frog. Transformation
does not necessarily imply that a frog is higher value than a tadpole, just
different.
Transformation in the health care system is often depicted in 2-
dimensional Cartesian drawings (see Figure 1) as “evolving” along (1)
the y-axis from FFS to P4P, case and bundled payment rates, and ulti-
mately to global capitation and population-based payments and (2) the
60 L.R. Burns and M.V. Pauly

x-axis from solo physicians to medical groups, provider alliances such as

physician-hospital organizations (PHOs) and independent practitioner
associations (IPAs), integrated delivery networks (IDNs), ACOs, and
Kaiser-like clinics prepared to accept capitation.8 In contrast to an or-
ganism, however, this transformation is not assumed to arise naturally,
but needs to be designed by policy experts and fostered by industry
leaders—and is assumed to arrive at a superior end state.
Figure 1 suggests an inevitable, linear, uninterrupted, and smooth
transition. The Health Care Payment Learning and Action Network
(HCP-LAN), launched in 2015 by the US Department of Health and
Human Services (HHS) to promote APMs, views the evolution in pay-
ment in terms of 4 stages.9 According to the Commonwealth Fund,
this trajectory is associated with both greater provider accountability
and greater impact on cost and quality. Perhaps this is why the trans-
formation is considered inevitable, even though it still needs external
encouragement and help.
These shifts are also said to be accompanied by a host of supporting
systems—closed networks, team-based care, population health, devel-
opment of quality measures, care coordination, etc—that permit greater
risk assumption by providers.4,8 Aided by such tools, providers can de-
liver health care that is higher quality, lower cost, more patient-centric
(rather than provider-centric), and coordinated.
There are several ways to think critically about Figure 1: (1) con-
sider prior transformations (both long term and short term) in the
history of the US health care system; (2) compare current changes
with those undertaken during the 1990s and ask what is different this
time around; (3) assess the likelihood of jointly accomplishing the dual
goals of transformation (higher quality and lower cost); (4) examine
the evidence regarding the spread of APMs and new provider organiza-
tional models and their impact on cost and quality; and (5) examine the
headwinds confronting this transformation, which may cause it to stall.
The remaining sections of this paper develop these 5 approaches.

Prior Transformations in the US Health

Care Industry
The US system has undergone several transformations extending back
to the early 1900s. In his book, Paul Starr depicted the rise of physi-
cian autonomy and then its gradual erosion in the 20th century—a
Transformation of the Health Care Industry 61

transformation lasting 80 to 100 years.10 Historian Rosemary Stevens

described the transformation of the American hospital from a community
institution focused on health (especially for lower income populations)
to a corporation increasingly focused on wealth—another transforma-
tion lasting roughly a century.11 Three other transformations lasting
50 to 80 years have been the ascendance of third-party payment over
out-of-pocket payment, managed care over indemnity, and public over
private sources of third-party payment.12 These precedents set a pretty
high bar for what might be labeled a “transformation.”
The advent of public and private insurance ushered in FFS payment,
an issue addressed in the current transformation. Moral hazard, esca-
lating expenditures that followed insurance coverage, and above-cost
FFS payment have bedeviled the industry ever since.13 During the rise
of managed care in the 1990s, payers sought greater cost control and
oversight of the quality rendered by providers. The confluence of their
roles as both payers and overseers (of quality and quantity) helped to
transform “the body and soul of American medicine,” set the current
stage for discussions of “value,” and provided a vehicle for managing it.14
The Health Security Act prompted horizontal and vertical integration
by hospitals in the 1990s (and beyond) in anticipation of the strong
managed care that was the core of the Clinton plan.
Figure 2 depicts many decade-by-decade transformations beyond
these momentous long-term shifts. The figure is not meant to be com-
prehensive but illustrative. These shifts include (1) 1910-1920s: the
Flexner reforms in medical education, the closure of many medical
schools, and the rise of organized medicine and medical specialties;
(2) 1930-1940s: the advent of private insurance; (3) 1940-1950s: the
advent of biomedical innovation and the National Institutes of Health;
(4) 1960s: the enactment of Medicare and Medicaid and the Kefauver-
Harris drug amendments; (5) 1970s: the various federal and state regula-
tory efforts to try to contain rising health care costs (such as certificate of
need); (6) 1980s: the prospective payment system and diagnosis-related
groups, the rise of outpatient care and ambulatory surgery centers (ASCs),
the Hatch-Waxman Act, and competitive market solutions to health
care costs (eg, antitrust enforcement); (7) 1990s: the rise of HMOs,
managed care, hospital system formations, and disruptive federal legis-
lation (eg, Health Security Act, Balanced Budget Act); (8) 2000s: advent
of consumerism, high deductible health plans (HDHPs), Medicare Ad-
vantage, and retail clinics; and (9) 2010s: big data and analytics and
 62

Figure 2. Historical Transformations in US Health Care

Pre-1930 1930-1950s 1960s 1970s 1980s 1990s 2000s 2010s

 Flexner  Blue Cross/Blue  Medicare &  Regulation  Competition  Resource-based  HMO backlash  Affordable Care Act
reforms Shield plans Medicaid  Rate setting  Antitrust relative value scale  Preferred  Narrow networks
 Ascendance of  Employer-based payment provider
 For-profit  Certificate of  Deregulation  Accountable care
organized health coverage hospital chains need  Clinton Health Plan organizations
 Managed care organizations
medicine  Social Security  Managed care  Consumerism
 Growth in  Cost control pushed by  Clinically integrated
 Rise of manpower employers mainstream
 Evolution of  Medicare networks
medical prepaid plans (eg, training
 Health
Maintenance  Prospective  Rise of HMOs Advantage
specialties  Quality metrics
Kaiser) programs payment
Organization  Narrow networks  High-deductible
WWII shortages of system/  Meaningful use
(HMO) Act health plans
 Great Depression   Rising HC costs diagnosis-  Hospital systems
 Falling national personnel  Big data
 Kefauver-Harris  Growing distrust related groups  Integrated delivery  Electronic
income Biomedical
 Drug of providers Hospital mortality networks medical records  Analytics
discoveries 
 Rising health Amendments scores Bundled payment
care (HC)  Provider health  Gain sharing 
 National Institutes plans
costs of Health
 Shift to outpatient  Pay-for-  Medicare Access
care  Capitation performance and CHIP
 Ambulatory Reauthorization Act
 Balanced Budget  Precision
surgery centers Act of 1997 medicine  Cost sharing
 Hatch-Waxman  Cost sharing  Retail clinics  Hospital systems
Act
 Management  Provider health
information system plans
advances
 Medical homes
 Blockbuster drugs
 Engagement
 Physician practice
management
companies

Adapted from Bradley Fluegel, Presentation to The Wharton School (January 2017)
L.R. Burns and M.V. Pauly
Transformation of the Health Care Industry 63

additional federal legislation (eg, the Patient Protection and Affordable

Care Act [ACA] and Medicare Access and CHIP Reauthorization Act
[MACRA]).
Most of these shifts were neither anticipated nor accurately forecasted.
Many did not positively transform the health care industry but rather
added to its complexity and fragmentation. For example, the shift to
outpatient care and ASCs did not reduce the rate of increase in health
care spending or improve clinical quality of care; it represented an effort
to squeeze the balloon of inpatient costs that, by increasing access and
convenience to an alternative setting, led to an increase in outpatient
volume and spending. Even with the best of intentions, transformation
did not usually result in higher quality at reduced cost. Over much of
the past century and through today, health care costs continued to rise
faster than growth in gross domestic product (GDP).

Transformation During the 1990s and

2010s: Déjà Vu All Over Again?
A second way to analyze the current transformation is to compare it with
more recent historical trends. Figure 3 contrasts changes in payment
and provider organization undertaken during the 1990s with those now
underway.
The two epochs share many similarities. Both include efforts to or-
ganize hospitals into horizontally integrated and vertically integrated
networks containing multiple providers. The earlier epoch contained
IDNs; the latter includes ACOs. Both also include strategic alliances
among hospitals and their medical staffs. The former included PHOs,
the most popular alliance vehicle of the decade; the latter includes
clinically integrated networks (CINs), which are PHOs on a slightly
larger geographic scale. The former included Wall Street–financed physi-
cian practice management companies; the latter includes equity-financed
models of specialty physician organizations.
The 2 decades similarly promote a continuum of care, narrow provider
networks, physician alignment/engagement, population health, and re-
ductions in care/cost variations (which are theorized to represent low-
value care). They also commonly share per capita payment to an en-
tity responsible to provide a range of medical services to a designated
population. Finally, both decades analyzed the cost-quality relationship,
64 L.R. Burns and M.V. Pauly

Figure 3. 1990s and 2010s: History Repeating?

1 99 0s 2010s
Payment Capitation Risk contracng
Health maintenance organiza n Narrow network
Cost-effectiveness Value
Control health care cost infla on Bend the trend
Variaons in care Low-value care
Health status of popula on Popula on health
Iron triangle Triple aim

Provider Integrated delivery network Accountable care organizaon

Organizaon Physician-hospital organizaon Clinically integrated network
Hospital alliance Hospital network
Physician pracce management Physician equity models
Seamless connuum of care Care connuum
Physician alignment Physician engagement

either in terms of cost effectiveness analysis (1990s) or simultaneous pur-

suit of a broad array of quality metrics and cost reduction benchmarks
(2000s).15
If these are indeed parallel developments, why does history seem
to be repeating what was regarded as not satisfactory the first time
around? One positive interpretation is that the 1990s’ solutions were
all good ideas but were before their time and lacked the infrastructure
and supporting systems to make them work. These supports would
include electronic medical records (EMRs), real-time patient informa-
tion, data analytics, and other innovations. With the development of
the latter in the new millennium, payers and providers may be poised
to implement the desired changes in a more graceful way with greater
effectiveness.
A different interpretation draws on the insight of John Kenneth
Galbraith.16 Galbraith wondered why the lessons from financial crashes
were often repeated with nothing learned. He concluded that old ideas
get respun by newer generations of managers and policymakers every
20 years as the prior generation (who were chastened enough not to
Transformation of the Health Care Industry 65

repeat them) died off or retired, whereas the new generation believed
they had developed an innovative new vision.
Which interpretation is correct? The experience of the 1990s showed
limited success. The primary vehicles for cost containment were lower
payment to providers (with perhaps lower real costs) and saying no
to patients. Spending and spending growth both fell for several years
as privately insured consumers moved to HMOs. But then the rate of
growth returned to its historical level, albeit from a modestly smaller
base. Efforts to develop narrow networks using HMOs appeared to
lower spending without harming quality, but stumbled due to patient
and physician protests (ie, the managed care backlash). Capitation and
closed networks never really spread from California to the rest of the
country. The new organizational models (eg, IDNs) failed to reduce
cost or improve quality. The physician practice management companies
exhibited similar disappointing results, with most going bankrupt.17
Provider efforts to develop a care continuum did not succeed financially
owing to the high expense of network development coupled with rela-
tively low revenues from services provided outside the hospital. All else
being equal, such results do not bode well for the 2010s’ variants whose
goal is to permanently reduce the rate of spending growth closer to GDP
growth. If true, drawing on a popular blues song by Robert Cray, “the
forecast calls for pain.”
The 1990s transformation was initiated and implemented by the
private sector with the government as a passive observer (that largely
resisted calls from physician organizations to intrude). This time around,
the government is leading the transformation in public programs (es-
pecially Medicare) and legitimizing similar changes in the private sec-
tor; this government endorsement has served thus far to protect efforts
from earlier criticism about care decisions being based on monetary
incentives.
However, the major difference between these 2 epochs is the mantra
and ideology of reorganization: the iron triangle versus the triple aim.
The iron triangle argued that, faced with constrained resources, soci-
eties must make trade-offs among the 3 goals: increased access, higher
quality, and lower cost of care.18 Such trade-offs were occasioned by new
technology that increased quality but also drove up health care costs.
Since the 2006 passage of health reform in Massachusetts, enhanced state
spending on insurance and health care has been accompanied by lower
spending on public safety, public health, mental health, education, and
66 L.R. Burns and M.V. Pauly

human services.19 Similar trade-offs have occurred at the household level:

increased spending on health insurance and out-of-pocket costs between
1984 and 2014 crowded out spending on housing, entertainment, food,
clothing, transportation, and other items.20,21
The iron triangle logic also explained how HMOs worked: enrollees
traded restricted provider access for lower premiums. HMOs of the 1990s
warned that their model was built on narrowing access to providers
(and new technology) in order to achieve lower cost and higher quality.
By the end of the decade, enrollees and their employers decided they
wanted a different solution (ie, preferred provider organization [PPO])
that offered them broader choice at a higher premium. In the full em-
ployment economy of the late 1990s, when firms sought to attract
scarce labor, both parties did not think the cost savings were worth the
hassle.
By contrast, policymakers in the new millennium have advocated
the “triple aim”—3 goals to be pursued at the population level: the
patient’s experience of care (care), population health (health), and per
capita spending on health care (cost).7 Unlike the iron triangle, triple aim
advocates did not view these 3 goals as irreconcilable but simultaneously
possible in the presence of an “integrator” (eg, ACOs). Moreover, the
triple aim viewed waste and inefficiency rather than technology as both
the major driver of cost and (low) quality and as subject to change if
only data, incentives, and provider attitudes would cooperate.
Successful pursuit of the triple aim by insurers or providers has yet to
be empirically demonstrated. CMS built the 3 aims into the Medicare
Shared Savings Program (MSSP) scorecard as the quality and efficiency
performance measures for ACOs. In doing so, the MSSP challenges
providers to deliver on all 3 aims (and perhaps all 3 angles of the iron
triangle) simultaneously, using new models of health care delivery (eg,
PCMHs, care coordination, and the recent Comprehensive Primary Care
Initiative [CPCI]) as the vehicles.22
The iron triangle has yielded the stage to the triple aim, but
their dueling prognoses of the probability of achieving multiple goals
simultaneously surfaced at a Yale University symposium in early 2016.23
The iron triangle’s goals of cost, quality, and access are embodied in
frameworks developed by the Commonwealth Fund, the World Bank,
and the World Health Organization. They also serve as intermediate
goals that drive health outcomes (National Academy of Medicine) that
are often used to evaluate the performance of ACOs, national health
Transformation of the Health Care Industry 67

systems, and national legislation such as MACRA.3,24-26 The sympo-

sium considered but did not resolve the key question: If low cost and
high quality are not synergistic (as the iron triangle suggests), then is
the triple aim really achievable? And are provider transformation ef-
forts to improve quality and reduce cost by moving along both axes in
vain?

End Goal of Transformation: Higher

Quality and/or Lower Cost
One way to answer these questions is to examine the relationship between
cost and quality. At the population level, there are conflicting findings.
Dartmouth Atlas researchers and others reported a negative relationship
in the Medicare population,27,28 other researchers reported a positive
relationship across both Medicare and commercial populations,29,30 and
still others found no relationship.31-33 A meta-analysis suggests the
overall correlation is nearly zero.34
Why might this be the case? One possibility is that the aims of higher
quality and lower cost are orthogonal. A second possibility is that the
data are generated by firms that differ in managerial efficiency so that,
although cost and quality trade off in every firm, those firms that choose
to produce at high quality are the more efficient, lower-cost firms.31
A third explanation is that cost and quality have a more complex re-
lationship that sums to zero—perhaps as pictured in Figure 4. This
curve reflects 3 types of process measures of quality.35 The upward slope
suggests cost and quality are positively correlated for a range of services
that are underused, such as vaccinations, taking prescribed medications
(eg, statins or beta blockers for heart disease), guideline-based care, and
both preventive and primary care. The downward slope suggests cost
and quality are negatively correlated for a different range of services,
such as antibiotics for simple infections. The flat part suggests cost and
quality are unrelated for another set of services, such as inappropriate
medications for the elderly and imaging for low back pain. This ex-
planation is consistent with that offered by both Berwick and other
researchers.7,35,36
What does this evidence (or lack thereof) mean for transformation ef-
forts? If providers offer highly valued services that patients underutilize,
they will have difficulty delivering on higher quality and lower cost at
68 L.R. Burns and M.V. Pauly

Figure 4. Cost-Quality Relationship

[Color figure can be viewed at wileyonlinelibrary.com]

Maximum Quality and

Poor Quality
Clinical Quality

Cost-effectiveness

Inefficiency

Underuse Misuse Overuse

$
Resource Consumption/Cost

Adapted from Bradley Fluegel, Presentation to The Wharton School

(January 2017)

the same time. If the services are worth their higher cost, value will
rise, but not if the services add modestly to quality and much to cost.
Conversely, if providers reduce low-value services (eg, the “Choosing
Wisely” campaign), they may accomplish both cost and quality goals
but at the expense of their FFS revenues. Finally, if providers reduce mis-
used services, they can achieve value by lowering cost and perhaps even
promoting quality—but perhaps also requiring significant investments
in quality improvement that show mixed results.37
If organizations receiving capitated payments are profit or
owner-value maximizing, the firm’s end goal according to eco-
nomics will be to minimize cost subject to just hitting exter-
nally imposed quality constraints. The firm will definitely blow
through “triple aim” policies but then, with quality increases
now commanding a somewhat higher cost, will further cut some
other input costs that would have added to quality, but on
dimensions that are less explicit, measurable, or enforceable. The firm
would not incur costs for things that leave quality unchanged or reduce
it, so it would be “efficient.” The key point is that the final observed
Transformation of the Health Care Industry 69

pattern could then be one where lower cost is not associated with either
higher or lower quality, comprehensively measured.
The inconsistent cost-to-quality relationship further suggests their
joint pursuit will require multitasking (and “multiknowledge”) by
providers to be successful—if someone can discover how to implement
such a model, maintain productivity, and avoid the temptation to sacri-
fice quality for lower cost or higher net revenue. This implies that the
strategies needed to address the manifold drivers of cost38 may differ
from those needed to make progress on a large vector of quality mea-
sures that may not be correlated with one another.30,39 Thus, efforts to
score well on one quality measure may not work to score well on others.
Moreover, their joint pursuit is likely to engender animosity between the
quality improvement team and the cost containment team. The “value
mindset” would require providers to be aware of and react to the costs
and clinical benefits of the quality team’s recommendations and to make
proper trade-offs between them.40

APMs and New Models of Provider

Organization: Penetration and Impact
For purposes of definition, APMs cover every payment method that (1)
differs from an FFS method that rewards only volume, and (2) seeks
to reward providers for taking accountability for cost, quality, or both.
HCP-LAN, for example, classified 28 payment models into a continuum
of 4 categories: FFS not linked to quality or value, FFS linked to quality
or value, APMs built on an FFS chassis, and population-based payment.
P4P models, for example, provide an incentive payment for hitting spec-
ified quality metrics; shared savings models split savings with providers
when they reduce costs below a benchmark and hit quality metrics. New
models of provider organization cover everything beyond solo medical
practice, freestanding hospitals, and the traditional hospital medical staff
(see Figure 1).

APM Penetration
In 2015, the government announced ambitious goals for Medicare
provider payments to be based on quality and value.41 Medicare FFS
payments through APMs are to rise to 50% by the end of 2018; the
percentage of Medicare payments linked to quality and value are slated
70 L.R. Burns and M.V. Pauly

to reach 90%. Shortly thereafter, large private insurers such as United-

Healthcare, Aetna, and Anthem announced similar plans to transition
to APM models.42,43
How much have APMs penetrated provider reimbursement? The
answer is not straightforward. First, physicians and hospitals are reim-
bursed by multiple insurers using multiple payment methods. What
constitutes an APM payment and its linkage to cost and quality may
differ across insurers. The percentage of providers receiving some APM
payment differs from the percentage of reimbursements based on APMs.
Second, the reported percentage of payer reimbursement to provider or-
ganizations (eg, groups) based on APMs often exceeds the percentage of
reimbursement to individual physicians in the group based on APMs.
Payers report greater readiness to embark on APMs, greater progress to-
ward value-based payment, greater (perceived) positive financial impact
of APMs on profitability, and greater provider readiness to implement
APMs, compared with what providers report.44 Third, any payment
system can be made attractive to providers if the payment rate is set
high enough, but then it will be unattractive to payers. Hence, overall
views depend on the level as well as the form of payment under one
arrangement compared to another.
What does the evidence show? Two surveys suggested rapid and high
penetration. Catalyst for Payment Reform reported that commercial
payments based on APMs rose from 11% to 40% between 2013 and
2014.45 A 2016 survey reported 55% reimbursement based on FFS,
14% based on capitation, 13% based on episodes or bundles, 9% based
on P4P, and 8% based on shared savings models (4% each for upside
and downside risk).44
Three other surveys reported more modest APM penetration. HCP-
LAN data from 2015 suggested that 62% of insurer payments are based
on FFS, 15% are based on FFS linked to quality or value performance
metrics (akin to P4P), and 23% are based on APMs with an FFS chassis
or population-based payment.9 A 2016 physician survey indicated that
compensation is tied to quality or value among 43% of physicians;
however, 77% said that only a fifth or less of compensation is linked,
while 51% said it was less than a tenth.46 Another survey of 33 large,
advanced multispecialty groups found that 66% of payments are FFS,
while 34% of payments are “at risk”: 2% P4P, 4% shared savings,
2% partial capitation, 3% shared risk, 16% global capitation, and 7%
payments from an owned health plan.47
Transformation of the Health Care Industry 71

Still other surveys suggested lower penetration levels:

r Only 12% of physicians and executives affiliated with the NEJM
Catalyst Insights Council surveyed in late 2015/early 2016 re-
ported that their organizations had more than 25% of patient
care revenues tied to risk sharing with payers. A majority (56%)
of respondents reported risk-sharing revenues below 25%; 20%
reported it was 0%. Surprisingly, 32% of respondents did not
know what the amount of risk sharing was. With regard to rev-
enues tied to quality improvement, only 15% of respondents said
that 25% or more of revenues were so linked; 12% reported it
was zero, and another 29% did not know.48
r Only 30% of physicians reported receiving any value-based pay-
ments in a 2016 Deloitte survey, broken out as follows: episode-
based payments (16% of physicians), bundled payments (13%),
shared savings (10%), capitation (10%), and shared risk (4%).
More than half of physicians indicated that less than 10% of their
personal compensation derived from incentive payments tied to
cost and quality goals; one-third said they were not eligible;
only 6% said they derived more than 20% of compensation from
APMs.49
r A survey by the American Medical Group Association reported
that 2015 payments from commercial payers were heavily dom-
inated by FFS (78%), with small percentages coming from
shared savings/ACO models (7%), shared risk (5%), and partial
capitation (4%).50
r Another study found only small percentages (5%-6%) of in-
patient hospital payments at risk under 3 Medicare P4P
programs (Hospital-Acquired Condition Reduction, Hospital
Readmissions Reduction, and Hospital Value-Based Purchasing)
between 2015 and 2017.51
r Finally, a national survey of medical practices reported that a
mix of salary and FFS productivity models account for the vast
majority (90%+) of physician reimbursement; only 5% of com-
pensation was tied to quality or other incentives.52

If true, why is the proportion of physician compensation based on

APMs apparently so low, given the high percentages of reimbursements
based on APMs reported by insurers? Interviews at 34 medical practices
72 L.R. Burns and M.V. Pauly

offered one explanation: payers’ incentives to the group were not

passed on to the individual physicians within it.53 Physicians were thus
shielded from direct exposure to payer risk or reward; moreover, financial
incentives passed on to the group were translated into nonfinancial
incentives for the individual physician. For example, a group or ACO
may pay a contracted physician based on FFS but make renewal of the
contract contingent on the physician’s impact on total costs of care. The
biggest financial incentive for physicians—even in those groups with
heavy APM exposure—was to increase FFS productivity by paying based
on relative value units (RVUs). In summary, it appears that APMs have
had (1) relatively little impact on physician incomes or how they deliver
patient care (covered later), and (2) a smaller impact on physician rewards
than on rewards to the larger organization in which they practice.
Since the mid-1990s, the percentage of the commercially insured
population enrolled in HMOs has fallen, from 31% in 1996 to 15%
in 2016.54 Not surprisingly, the percentage of office visits covered by
capitation has also dropped to below 10% across public and private
payers.55 In sum, FFS payment remains the predominant payment model
for providers, while APMs are struggling to gain traction and make a
difference.56,57
Similarly, among hospitals, survey research suggests that only 13 of
80 hospital systems derived more than 10% of net patient revenue from
risk-based contracts in 2015.58 American Hospital Association (AHA)
data show the percentage of hospitals reporting any capitated revenue fell
from 12.6% to 8.0% between 2003 and 2014. Two-thirds of hospitals
reported that they derived less than 1%. Why was the percentage so low?
One possibility is that economic surpluses from commercial (and likely
non–risk-based) contracts make risk-based contracts less attractive, so
hospitals with little excess capacity decline to participate in the latter.

APM Impact on Cost and Quality

Given current low APM penetration and few randomized trials, it
is difficult to determine systemwide impacts of APMs on cost and
quality. Early evaluations of P4P programs found no impact on hospital
quality.59,60 A meta-analysis of P4P programs reported no positive
impact on patient outcomes in any care setting, but did find positive
effects on process measures in ambulatory care.61 Medicare’s Hospital
Transformation of the Health Care Industry 73

Value-Based Purchasing program likewise exerted no significant impact

on quality or the patient’s experience of care.62,63
Several evaluations of bundled payment suggest mixed effects. The
Medicare Participating Heart Bypass Center Demonstration reduced
Medicare program spending, beneficiary spending, and hospital costs
(relative to controls) in 3 of the 4 initial sites.64 While demonstration
sites reduced mortality rates, there were no significant changes in appro-
priateness of care or patient health outcomes. The Acute Care Episode
Demonstration improved physician collaboration with hospitals on stan-
dardizing order sets and materials, as well as on joint negotiations with
vendors that reduced implant prices. Medicare saved about $585 per case
in the demonstration (mostly through lower implant prices); however,
roughly 45% of those savings were offset by increased postacute care
spending. The evaluation found little evidence of changes in quality.65
The Bundled Payments for Care Improvement Initiative reported
“modest reductions in Medicare episode payments for select clinical
episode groups with isolated instances of quality declines and fewer
instances of increased quality.”66 These findings held for one set of
conditions (orthopedic) but not another (cardiovascular surgery). For the
most widely adopted bundled payment model (model 2; discussed later),
spending reductions were due to lower use of postacute care. The vol-
untary nature of the program, with self-selected program participants,
may limit the ability to infer causation from these findings.67
In sum, research suggests the savings under bundled-payment models,
when they occur, come primarily from reduced prices paid for inputs or
lower use of postacute care, rather than process efficiencies inside the
hospital.68 Bundled payments can thus lead to lower (input) prices and
supplier profits and perhaps lower overall spending, which is promising.
However, bundled-payment models have yet to show a consistent impact
on quality, real inpatient resource costs, or overall resource costs.69
Researchers have also noted the difficulties of implementing bundled
payments. These include the complexity of execution, the continuing
incentive to overtreat, the task of capturing all of the necessary clinical
and financial data, issues with prospective payment, the failure by
hospitals to increase volume and market share to offset the costs of
care redesign, the low return on investment, and the lack of consumer
alignment and engagement.69-72
Catalyst for Payment Reform executives claimed in 2014 that “the
proliferation of value-based payment . . . arrangements only matters
74 L.R. Burns and M.V. Pauly

if they succeed at reducing costs and improving the quality of care.

And for many value-oriented payment models, we still don’t have the
evidence.”45 Based on the continuing flow of nonsignificant results,
some observers have called for a “VBP reboot.”73 Whether evidence that
they (1) reduce spending growth while leaving quality unchanged or
(2) improve quality with little or no effect on spending will satisfy these
observers has also not been determined.

New Models of Practice Organization:

Penetration
Physicians
Just as there are difficulties in classifying provider payments based on
APMs, there are difficulties in assigning physicians to different organi-
zational models due to the “nesting” of their practices. For example, an
individual primary care physician (PCP) can simultaneously be a solo
practitioner, a member of one or more local hospital medical staffs, a
member of one or more local IPAs and/or PHOs, an attributed PCP to
an MSSP-ACO, a member of a CIN, and part of an IDN based on any of
the above affiliations. The same may be true of specialists, who can be af-
filiated with more than one MSSP-ACO. As a result, physicians can have
their practice time and patient caseload—and perhaps their attention to
quality measures and resource use—distributed across multiple settings.
We have little data at the physician level on this distribution, and even
less evidence on how it matters for changing physician behavior.
We also lack comprehensive, longitudinal, and national data on the
prevalence of many of the older forms of practice organization such as
medical groups and physician IPAs, as well as some of the newer forms,
such as CINs. Data on physician employment are muddied by the type
of owner; the largest class of physician employers are other physicians,
not hospitals. The same problem characterizes provider membership
in ACOs. ACOs can serve both public and private payers and can be
both hospital- and physician-sponsored. ACOs can also have multiple
generations (eg, MSSP, Pioneer, Next Generation) and/or multiple tracks
(eg, one-sided risk only, two-sided risk, and variable percentages of
savings/losses).
What does the evidence show? Among physicians, the percentage in
solo practice has fallen sharply over the long term, but declined only
Transformation of the Health Care Industry 75

slightly in the past few years (estimates vary). American Medical As-
sociation (AMA) data show a drop in solo practitioners from 43.8% in
1983 to 20.0% in 201274 ; by contrast, National Ambulatory Medical
Care Survey data show the percentage of solo physicians falling only
modestly, from 34.7% in 1999 to 31.5% in 2010.75 Other AMA data
indicate a recent, narrow decline in solo practitioners from 18.4% in
2012 to 16.5% in 2016.74,76,77 Combined data from the AMA’s Socioe-
conomic Monitoring System Survey and Physician Practice Benchmark
Survey suggest more dramatic change in physician practice size over
the longer term (1983-2012) than over the near term (2012-2016).74,77
For example, the percentage of physicians in groups of 25 or more rose
from 5.0% to 19.3% between 1983 and 2012, but then to only 21.2%
between 2012 and 2016. Overall, the majority of physicians remain in
solo or small practices.78
The change in the size distribution of medical groups has also been
more (less) dramatic over the long (short) term. According to the AMA’s
group practice survey, the percentage of groups of 3 to 4 doctors fell
from 50.3% to 41.9% between 1998 and 2011, while the percentage
of groups of 5 to 9 doctors rose slightly from 33.4% to 37.3%; the
percentages in groups of 10 to 49 and 50 or more changed from 14.4%
to 18.3% and 1.9% to 8.4%, respectively.75 Similarly, the percentage in
large groups (100+ physicians) remained small and rose only slightly,
from 0.7% to 1.1%. The percentage of physicians in group practice
remained fairly stable, rising slightly from 28.3% to 33.9%. Data from
the Medical Group Management Association (MGMA) showed a slight
drop in practices of 10 or fewer doctors between 2004 and 2012 from
63% to 55%, while the percentage of practices with 11 to 25 doctors
rose only from 20% to 21%, and the percentage of practices with 26
to 50 doctors rose only from 8% to 9%.75 There is a trend toward
physicians practicing in groups with 151 or more doctors, but the
shift is more subtle (from 3% to 7% between 2004 and 2012) than
pronounced.
Since 2012, the change in the group size distribution has remained
small. According to the AMA’s Physician Practice Benchmark Survey,
the percentage of physicians in practices smaller than 5 doctors fell from
40.0% to 37.9% between 2012 and 2016. Similarly, the percentage of
physicians in practices of 5 to 10 doctors fell from 21.4% to 19.9%; the
percentage in practices of 11 to 24 doctors fell from 13.5% to 13.3%;
the percentage in practices of 25 to 49 doctors rose slightly from 7.1%
76 L.R. Burns and M.V. Pauly

to 7.4%; and the percentage in large practices of 50 or more doctors rose

from 12.2% to 13.8%.77
There is a trend toward more hospitals employing physicians and more
physicians being employed by hospitals. Some employment estimates are
probably too high, likely because they include physicians employed by
other physicians. For example, Accenture and Credit Suisse estimated
that two-thirds of physicians were employed (data for 2013-2014).79
Avalere Health’s analysis of SK&A data suggested 38% of physicians
were employed by hospitals in July 2015, up from 26% in 2012—a
jump that also seems high.80
More likely, the shift in employment has been gradual rather than
dramatic. The percentage of hospitals employing physicians rose from
30.3% to 34.7% between 2008 and 2012 and then to 39.7% in 2015.81
AHA data show a rise in hospital-employed physicians from 70,074 to
122,119 (roughly a seventh of all practicing physicians) between 1998
and 2013.75 AHA data also show growth in employment slowing, from
14.1% in 2010-2013 to 4.5% in 2013-2015 (data courtesy of Peter
Kralovec). AMA data suggest that the percentage of physician practices
with at least some hospital ownership rose only slightly, from 23.4% in
2012 to 25.4% in 2016; the percentage of physicians who were direct
hospital employees rose from 5.6% to 7.4%.77
There are also varying estimates of hospital ownership of physician
groups. Data from the National Survey of Physician Organizations show
that the percentage of large groups (20+ physicians) owned by hospitals,
HMOs, and other corporations rose from just under 26.6% in 2004-2006
to just over 35.6% in 2012-2013; conversely, the percentage of small
groups (<20 physicians) so owned rose from 8.3% to 11.3%.81 This is
more in line with MGMA data that show modest growth in hospital own-
ership of groups, from 8.3% to 13.6% between 2003 and 2012.75 Data
from SK&A indicate that the percentage of physicians in practices owned
by hospitals rose from 11.4% to 21.1% between 2008 and 2012.82

Hospitals
For their part, hospitals can be simultaneously freestanding institutions,
a member of a nonownership-based hospital network or alliance, a mem-
ber of a CIN, and a member of one or more ACOs. We have no data
on the distribution of their patient reimbursements from these different
organizations and contracting vehicles.
Transformation of the Health Care Industry 77

There has been a continuing, gradual trend toward system member-

ship. Between 2005 and 2015, the proportion of hospitals that belong
to systems rose from 55.0% to 65.8%; the percentage of community
hospitals belonging to networks rose from 29.5% to 34.5% (data cour-
tesy of Peter Kralovec). Not only are more hospitals now members of
systems, but they are also members of larger-sized systems. Between
1998 and 2012, there was a 15.6% drop in freestanding hospitals and
a 5.0% increase in hospitals belonging to systems of 2 to 5 facilities,
a 10.6% rise in hospitals belonging to systems of 6 to 20 facilities,
and a 17.9% rise in hospitals belonging to systems of 21 or more
facilities.83
Starting in the mid-1990s, there was a long, gradual decline in the per-
centage of hospitals belonging to physician-hospital strategic alliances
such as PHOs, hospital-based IPAs, management services organizations
(MSOs), equity models, and foundation models. In 2012, this decline
began to reverse as hospitals revisited such vehicles as a possible chassis
for ACOs.84 By 2015, as many as 15% of hospitals featured a PHO
(whether an open or closed model). Overall, however, the percentage of
hospitals using any of these alliance and ownership models remained
constant between 1995 and 2013, averaging around 49%.
With the passage of the ACA, ACOs have developed contracts with
both MSSP and commercial payers. First-quarter 2017 data from Leav-
itt Partners show the number of total ACOs increased to 923, with
patient enrollment of 32 million.84 Roughly half of ACOs are hospital-
sponsored; the remainder are mostly physician-sponsored. The spread of
ACOs does constitute a large-scale change in the provider landscape—
much in the way the spread of IDNs did during the 1990s. They have also
grown in enrollment from roughly 2% to 10% of the patient population
between 2011 and 2016; ACO enrollment of Medicare beneficiaries has
slowed or stalled, especially in comparison to Medicare Advantage.

New Provider Organization Models’

Impact on Cost and Quality
There has been considerable research on the cost and quality impact of
new models of physician practice, horizontal integration of physicians,
horizontal integration of hospitals, vertical integration of hospitals with
physicians, and ACOs. Several literature reviews that have amassed these
78 L.R. Burns and M.V. Pauly

findings are briefly summarized here and supplemented with more recent
evidence.75,85-87
With regard to new models of physician practice, hospitalists have helped
to lower hospital stays and total costs with little change in quality,
but perhaps a decrease in care coordination.88 The wide heterogeneity
among PCMHs makes it difficult to draw conclusions about their ef-
fects. Research has found positive impacts on quality,89 no impact on
quality,90 and positive effects on patient compliance with medications.91
Research has also found few effects on cost or utilization.90 A recent
evaluation of the CPCI model reported increased payments for care co-
ordination to PCPs exceeding $203,000 per practice, modest improve-
ments in patient experience, but no net savings.92 Many of the delivery
system innovations undertaken by the CMS Innovation Center and in
the private sector (eg, PCMH) have failed to impact the total cost of
care.93,94
With regard to horizontal integration of physicians, group practices are
more productive than solo practitioners. However, the scale economies
get exhausted fairly quickly—eg, around 10 physicians for single spe-
cialty groups (the most prevalent group form). There are also no scope
economies among multispecialty groups. In addition to the lack of cost
efficiencies among larger groups, there is no clear evidence that they
enjoy any quality advantages.75
Equally troubling is the fact that larger practices and structural inte-
gration do not foster patient perceptions of “integrated” care.95 Instead,
practice size is associated with higher physician prices without any re-
lationship with quality, total spending, or the patient’s experience.96-98
Part of the problem may be that integrated, multispecialty practice
opens up new opportunities for the group to profit under FFS if their
PCPs are rewarded for making more referrals to group specialists or to
cut corners if they are paid capitation.
With regard to horizontal consolidation of hospitals, merging two facil-
ities into one helps to lower costs and increase volumes, but does not
necessarily improve quality. On the other hand, consolidating facilities
into a single system generally does not lower costs,99 although one study
reports more favorable results.100 Moreover, system formations may in-
crease costs as systems get bigger and regional in their operation,101
may lead to greater investments in quality improvement, but may also
lower quality of care.85-87 Why is this the case? Any integration is typi-
cally restricted to administrative systems and group purchasing, which
Transformation of the Health Care Industry 79

represent only a small percentage of costs; conversely, little integration

is achieved on the clinical side, which represents a larger percentage of
costs. There is also no effort to consolidate production capacity.
Evidence over several decades continues to suggest that hospital-
level scale economies are exhausted at relatively small sizes (fewer than
300 beds). As business historians have noted, scale economies rest
on 3 pillars—increased volume, reduced physical capacity, and faster
throughput (eg, processing of patients at a faster speed)—none of which
hospitals achieve by forming systems.102 As a result, there are no scale
economies in hospital systems; in fact, there may be scale diseconomies
as systems form and get larger. There is also consistently no evidence
for scope economies among hospitals as they add outpatient services to
their inpatient services.99,103
Hospital consolidation further suffers from some downsides. These
include reduced competition, the ability of systems to extract higher
rates from insurers with resulting higher premiums passed onto em-
ployers, lower insurance take-up rates by employees in the face of higher
premiums, lower resulting levels of insurance, resistance to risk con-
tracting and APMs, and diversion of hospital attention to issues other
than quality and cost. Herding a larger number of disparate hospitals
can consume a large amount of management effort.
With regard to vertical integration of hospitals with physicians, recent
studies reinforce the literature reviews. Hospital employment of physi-
cians leads to higher prices for physician services charged to insurers,
higher hospital costs, lower quality, lower productivity, and possibly
higher readmissions.104-111 Indeed, there is some evidence that patients
of employed physicians are treated at higher cost, lower quality (ie,
low value) hospitals and show a higher use of low-value services.81,112
Why are hospital costs higher? Upon employment, hospitals assume re-
sponsibility for the physician’s salary and benefits, malpractice coverage,
office staff salaries and benefits, office space rental and equipment, and
infrastructure investments needed to fulfill Site of Service code 22 (On
Campus – Outpatient Hospital) billing requirements. Direct financial
incentives to motivate physician productivity are attenuated. There is
similarly no strong evidence for cost and quality benefits conferred by
membership in physician-hospital strategic alliances (eg, PHOs, IPAs,
MSOs).
With regard to ACOs, most data pertain to Medicare Pioneer and
MSSP-ACOs. Among the Pioneer models, 23 of 32 had dropped out of
80 L.R. Burns and M.V. Pauly

the program by the time of its sunset in 2016. Program year 2015 data for
the remaining 12 participants showed an average savings of $2.7 million;
however, of the $34 million earned, one ACO accounted for 72% of the
savings.84 Between 2012 and 2014, many showed improvement on the
30-plus quality metrics, but less than 30% sufficiently reduced costs to
earn shared savings.
Roughly half of the ACOs reduced spending. The percentage of ACOs
achieving savings was correlated with earlier start years and benchmark
levels per beneficiary. ACOs led by physicians achieved a higher sav-
ings rate compared to hospital-led ACOs; smaller ACOs (with a mean
number of beneficiaries less than 10,000) achieved greater net savings
per beneficiary than larger ACOs. The relatively small size of ACOs,
and thus the relatively low percentage of providers’ patients who have
been attributed to the ACO, provides only weak incentives to pursue
hospital-wide strategies to reduce costs that might have spillovers to
non-ACO patients.
The ACO movement has also been beset by notable failures and
continuing dropouts among the newer-generation models. Cornerstone
Health Care constituted one of the few ACOs that succeeded in achieving
both higher quality and lower cost compared to its peers. It was also
explicitly modeled on the premise of achieving the transformation from
(1) volume to value and (2) FFS to population health.113 By December
2016, however, Cornerstone had ceased to operate as an independent
entity, plagued by the amount of personal debt assumed by its physicians
to finance the ACO’s infrastructure, as well as the defection of 70 of its
specialists after HHS Secretary Sylvia Mathews Burwell announced her
payment initiative in 2015.114
ACO analysts have engaged in an interesting exchange on the savings
potential of ACOs. In August 2016, CMS pronounced it had reaped
$1.29 billion in total savings from Pioneer and MSSP models since
2012, with $429 million savings in 2015. That same month, Har-
vard researchers replied that half of the ACOs made money while half
lost money in 2015. After paying providers their bonuses, CMS lost
a net of $216 million, which did not include CMS program costs.115
In September 2016, Leavitt Partners reported lots of variation in ACO
cost and quality, and that quality was unrelated to both spending and
savings. The savings rate was tied to the benchmark rate. Moreover,
several managed care veterans (eg, Dartmouth, Sharp) dropped out of
the ACO program. In October 2016, other Harvard researchers reported
Transformation of the Health Care Industry 81

savings of $287 million in 2014.116 Savings totaled $685 million after

taking into account estimated spillover effects to non-ACO patients and
reduced Medicare Advantage costs due to lower benchmarks; as noted
above, spillovers in smaller ACOs may be questionable.
By the end of 2016, MedPAC commissioners called the MSSP savings
“incredibly unsatisfying.” According to the HHS, these savings totaled
nearly $1 billion, or roughly 0.15% of Medicare spending. In Summer
2017, ACO analysts engaged in a second heated exchange on many of
the same issues.117
On the Medicaid side, a recent evaluation of Oregon’s Coordinated
Care Organization model showed some improvements in patient access
and quality, but minimal cost savings. This is particularly noteworthy
given the large amount invested in the program.118
What none of these analyses addressed was how much money, time,
and energy providers had to invest upfront in ACOs to reap these savings.
According to the National Association of ACOs survey, ACOs spent an
average of $1.62 million to participate in the MSSP.119 This is much
lower than the amount ($11.6 million to $26.1 million) estimated by
the AHA.120 Part of the difference may lie in the sample of organizations
studied by the 2 groups (eg, heavily weighted by physician groups vs
hospitals).
Recent research suggests that ACOs achieve savings in nonhospi-
tal, nonphysician care. In one study, hospitals affiliated with ACOs
achieved lower readmissions from skilled nursing facilities than non-
ACO-affiliated hospitals.121 In another study, ACOs reduced admissions
and stays to postacute sites without harming quality.122 There were no
changes in hospital readmissions or mortality. These results suggest the
ACOs’ incentives rest on reducing services not provided in-house rather
than on reducing hospital utilization.
The mixed ACO results parallel those of its progenitor, the Medicare
Group Practice Demonstration. The demonstration employed a shared
savings model built on P4P whereby groups would enjoy savings if they
lowered cost relative to local controls and scored well on 32 quality met-
rics. Results across the 10 demonstration sites showed improvement on
quality but mixed results on cost. A small number of sites achieved most
of the savings; their efficiencies were counterbalanced by a lack of savings
at the other sites.123,124 Most of the savings were concentrated among
dual-eligible beneficiaries—suggesting the possible need to target such
initiatives to narrow population segments.
82 L.R. Burns and M.V. Pauly

Going forward, only 42 of the 480 MSSP-ACOs are in tracks that

qualify as “advanced APMs”—6 are in Track 2 (two-sided risk, up to
60% savings and no less than 40% of losses), and 36 are in Track 3 (two-
sided risk, up to 75% savings, 40%-75% losses). The vast majority have
avoided any downside risk by remaining in Track 1.84 Such provider
risk-aversion may not bode well for cost containment, let alone quality
improvement.
Indeed, there is some evidence that providers may have difficulty
managing risk in risk-based contracts. A recent study of 15 nationally
prominent IDNs found no relationship between the amount of “revenue
at risk” with either profitability or severity-adjusted cost of care. The
amount of revenue at risk was actually positively correlated with higher
Medicare spending in the last 2 years of life. Compared to their pri-
mary in-market competitor, IDN flagship hospitals had higher average
costs per case, no meaningful differences in clinical quality measures
(eg, readmissions, infection rates, complication rates), and no meaning-
ful differences in either patient satisfaction scores or Leapfrog safety
ratings.125

Headwinds Facing APMs and New

Provider Organization Models
We have had mixed success developing new payment and provider orga-
nization models that address cost and quality goals. One way to explain
why proposed social changes do not succeed is to draw on “force field
analysis”: the driving forces behind desired changes face restraining
forces that oppose them.126
Changes in payment and organization have either been adopted un-
der government pressure, advocated by key opinion leaders, or pur-
sued by providers. There is no individual evidence and no nationwide
movement of consumers asking for changes in how their doctors are
paid or how their hospitals are organized. Consumers have “voted
with their feet” in switching to both Medicare Advantage plans and
HDHPs in private insurance markets, organizational forms that are
nearly polar opposites of each other. An analysis of the forces restrain-
ing new payment and provider models suggests we may need to “curb
our enthusiasm” about the purported transformation of the health care
industry.
Transformation of the Health Care Industry 83

Physician Headwinds
Physicians are an important restraining force to both APMs and
new organization models. Physicians prefer FFS over any of the
APMs promoted by payers and policymakers.49 A large percentage of
physicians are unaware of how much of their compensation is based on
APMs, partly due to low awareness of their eligibility for shared savings
and limited knowledge of which patients are attributed to an ACO.127
This is also partly because ACO financial incentives exist at the contract
level, not at the individual physician level, and the fact that practice
organizations shield physicians from direct risk-based or quality-based
compensation. Practice-level financial incentives are usually trans-
formed into nonfinancial incentives (eg, using performance feedback or
selective retention based on quality/efficiency) for individual doctors.
There may also be inconsistencies between financial and nonfinancial
incentives (eg, RVU productivity vs cut costs) that deter risk transfer, as
well as the desire to avoid (1) drastic income reallocation, (2) operational
costs of administering complex physician compensation formulas, and
(3) imposition of documentation requirements that foster physician
dissatisfaction. Were he alive and studying health care, Sigmund Freud
might be tempted to retitle his classic Civilization and Its Discontents as
Transformation and Its Discontents.
For all of these reasons, APMs typically have a negligible effect on
physicians’ income and perceived risk. APMs may also have had a negli-
gible effect on national expenditures for physician and clinical services—
given comparable growth rates in 2007 (6.7%), 2015 (6.3%), and 2016
(6.6%).128
Physicians are willing to address the issue of waste but see it as some-
one else’s fault and not necessarily under their individual control.129
This may explain why physicians are (1) averse to moving up the y-axis
in Figure 1 and contracting for risk they feel they cannot control, and (2)
skeptical about new organizational models to improve quality or reduce
cost. In 2016, only 8.1% of physicians “mostly agreed” that hospital
employment would enhance quality of care and decrease costs, while
25.7% “somewhat agreed” and two-thirds “disagreed.”46 Employed
physicians felt more positively (45.7% compared to 33.8% of physicians
overall) that employment would enhance quality and decrease costs, but
they were still more likely than not to view employment skeptically.
Employed physicians were similar to nonemployed physicians in the
percentage of their total compensation tied to quality metrics.
84 L.R. Burns and M.V. Pauly

With regard to ACOs, only 10.9% of physicians believed that ACOs

were likely to enhance quality and/or decrease cost; 38.7% believed
ACOs were unlikely to do so; and 22.3% felt the gains in quality or cost
would not justify the investment. Only 12.8% of employed physicians
felt that ACOs would enhance quality and/or decrease costs. Employed
physicians were nearly as likely as nonemployed physicians to report that
they participated in a range of APMs such as bundled payments (33.4%
vs 29.2%), ACOs (40.5% vs 33.6%), and any other models (14.8% vs
16.6%). Overall, as little as 5% of physician compensation may be at
risk for quality and other factors.52
Along the same lines, 59.2% of respondents felt they had little
ability to significantly affect the health care system; 55.7% of em-
ployed physicians echoed this sentiment. Conversely, 72.1% believed
that their practice had been adversely affected by external factors such
as EMRs and treatment protocols, while only 10.3% felt the impact
was little or nothing; nearly the same percentage (70.5%) of employed
physicians expressed the same sentiment. Clearly, physician employ-
ment did not translate into physician engagement with the intended
transformation.
Beyond these sentiments, physician behaviors may undermine both
APMs and new organization models. A recent case study highlighted the
high rate of physician turnover in the Partners HealthCare ACO.130 Only
52% of physicians were on contract over the first 3 years of the contract,
with large percentages coming and going each year. The downside here
is that departing physicians sometimes take their patients (the ACO
beneficiaries) with them. This partly explains why ACOs also experience
high patient turnover (ie, “population loss”).131 Both types of turnover
likely undermine quality, cost, and population health efforts.
Some ACO advocates now suggest that financial incentives currently
offered inside new organizational models may be too weak to moti-
vate physicians to change their behaviors and deliver more cost-effective
care.132 According to their argument, ACOs must employ robust non-
financial motivational strategies to change (in turn): PCPs’ behaviors,
PCPs’ care delivery (eg, using teams, physician champions, data shar-
ing, care coordination), and hopefully their costs, quality, and patient
outcomes.133 Others suggest that only a large-scale shift to capitation
can generate enough surplus to finance care improvements.134 The
unanswered question is whether enough physicians will accept such
challenges at a low enough price.
Transformation of the Health Care Industry 85

A more fundamental issue with physician engagement in transfor-

mation is the downward-sloping gradient from the hospital executive
office (ie, “C-suite”) to clinician leaders to rank-and-file clinicians in
their favorable views of transformation. When asked about the impact
of value-based care delivery on quality, 62% of executives responded
favorably compared to 59% of clinician leaders and only 47% of clini-
cians. A similar gradient was observed when asked about the impact of
APMs (74% vs 67% vs 58%) or the value of Medicaid demonstration
programs (51% vs 40% vs 31%). Executives and physicians also differ
in their views about how to reduce costs.48
The divide separating the C-suite from practicing physicians is based
in part on geographic location (hospital system headquarters vs clinical
area), hierarchical level, and professional training (eg, MHA/MBA vs
MD). The multiple fault lines suggest that alignment and engagement
are likely to be difficult and even deteriorating. Surveys show a decrease
in physicians reporting intellectual stimulation, collegial interaction,
financial rewards, and the prestige of medicine as most satisfying about
their practice.135 These issues may, in turn, cause downstream problems
with quality improvement and cost control: disengaged physicians are
reportedly a cause of poor quality and medical errors.136
Why is this so? Physicians report being on a “treadmill” in their hos-
pital practice: forced to be more productive to avoid stagnating incomes
but also faced with rising patient complexity that demands more of
their time. They also feel that quality metrics from payers are (1) “the
bane of their existence” and/or (2) what managers want to extract from
EMRs rather than what doctors or their patients perceive as quality care
(eg, listening to patients).137 With the growing size and bureaucracy of
hospital systems, physicians feel that the C-suite is increasingly detached
from the reality of frontline medicine and is increasingly focused on
data, metrics, and policies (eg, standardization, in-house referrals).136,138
Some medical groups also have reportedly ditched clinical integration
mechanisms (ie, “care management practices”) designed to improve
quality due to perceived ineffectiveness and the disruption caused to their
practices.139
There are also reports of growing physician “burnout” at the front
line of care delivery caused by the above.140,141 This dissatisfaction may
increase even further as APMs receive greater impetus and the physician
supply shortage worsens. Recently, 10 health system executives labeled
physician burnout as a “public health crisis.”142 Some analysts have called
86 L.R. Burns and M.V. Pauly

for an extension of Berwick’s triple aim to encompass “the quadruple

aim” of improving the work lives of providers.143
Moreover, despite payer efforts to promote value-based purchasing,
physicians continue to over- and underutilize care. Part of the problem
is staying current with the growing scientific literature. New medi-
cal practice that is widely cited is often contradicted by subsequent
evidence,144 but physicians lag in responding.145 Physicians also make
low use of quality or cost data in their referrals.49

Patient Headwinds
A parallel concern is that patient beliefs and behaviors can undermine the
success of APMs and new organizational models. More than half of the
US population assign low importance to their own personal health.146 A
large percentage (35%-45%) of patients are low in terms of “activation”:
15%-20% are disengaged and overwhelmed, with another 20%-25%
aware but struggling.147 Activation levels may be even lower among the
Medicare population.148 Activation levels are related to healthy, preven-
tive, and disease-specific self-care behaviors and lower per-capita costs.
Physicians note that few patients are “highly engaged.”149 Nearly
half (48%) of executives and clinicians surveyed in one study believe
that patient engagement can impact quality, while only 27% believe it
can impact cost. However, they also believe that the two most effective
mechanisms to activate patients are patient portals and secure emails,
which involve no face-to-face interaction.150 Such interaction is critical
to engage the chronically ill in care coordination programs.151,152 It is not
clear that engaging patients using digital technologies or mobile devices
will change their behaviors to avoid unhealthy habits, which may ulti-
mately be reflected in higher reported costs and poorer health outcomes.
It is also unclear that APMs deal with what patients think is important
to them (eg, functional status, depression-free days, convenience).
In addition to patient turnover from ACOs, patients engage in care-
seeking behaviors that increase out-of-network utilization (ie, “leakage”)
that can undermine ACO success. Avoiding such utilization is neither
prohibited by ACOs nor part of the patient’s psyche, since patients
typically don’t know they are ACO members. High-cost enrollees also
frequently seek care in other census regions, thus exacerbating the cost-
containment challenges facing ACOs.153
Transformation of the Health Care Industry 87

More generally, there is a problem with health literacy. Like physi-

cians, patients may be unaware of what “low-value care” is, let alone
be intelligent consumers of high-value care or activated participants,
partly because they are not exposed to the cost portion of the value
quotient.154 As much as one-third of patients have difficulty envisioning
benefits from avoiding low-value care; among the less educated, the
percentage is one-half. One report describes “an unhealthy truth”:
only 1 in 6 Americans comprehend the magnitude of the problem of
chronic disease and its impact on mortality and spending.155 Another
suggests that patients are uncertain how to manage their chronic
conditions.156
To be sure, there is hope that “consumerism”—in the form of HDHPs,
higher deductibles, price transparency, etc—will foster greater shopping
and utilization of high-value services. However, results from HDHPs
indicate patients restrict all types of utilization (both high-value and
low-value care) in order to reduce spending.
There are disturbing reports of falling life expectancy among US
white males aged 45 to 54.157 Researchers suggest growing “despair”
driven by stagnant personal incomes, loss of employment, family
breakdowns and other sociodemographic challenges, and beliefs that
they will not live the same lives as their parents. This despair contributes
to poor personal behaviors and lifestyle choices that translate into
chronic illness, morbidity, and mortality. Such findings are confirmed
by studies documenting unhealthy behaviors among lower-income
workers.158,159
These reports highlight the importance of the “social determinants
of health” and social spending as a strategy to improve health
outcomes—rather than payment and organizational initiatives at the
center of the current transformation.160,161 They also emphasize the
difficulty of improving health from the supply side in the face of
stagnating middle-class incomes and greater disparities in wealth in a
slow-growing economy. The “miracle drug” of a high and growing real
income is in short supply among much of the population, even with low
unemployment.

Political Headwinds
Transformation may face political headwinds as well. The single most
disruptive force in US health care may be the federal government and
88 L.R. Burns and M.V. Pauly

CMS. They are the parties responsible for many changes charted in
Figure 2. Providers and payers are forced to respond to these initiatives
without much say in their formulation or implementation.
These changes often lead to industry churn. The push for APMs,
embodied initially in P4P and more recently MACRA, sought to deal
with the SGR problem in physician payment enacted 20 years ago as part
of the Balanced Budget Act (BBA). Congressional reluctance to make
an intended 4.8% SGR cut in physician payment in the early 2000s
(dictated by BBA) led CMS administrators to advocate for a political
solution, which became known as the “doc fix.” The solution postponed
the annual SGR cut and ushered in P4P, even though there was little
research evidence that paying providers to meet specific performance
indicators improved quality of care.162 The subsequent failure of P4P
led payers and policymakers to turn to the new strategy of VBP that
has now been embodied in MACRA, which terminated the need for an
annual doc fix and averted a roughly 25% fee cut in physician payments.
MACRA will be phased in over 10 years and will ultimately cause
dramatic reductions in physician payment in the traditional Medicare
FFS system. Skeptics might argue that this continues a decades-long
effort at “kicking the can down the road.”
Survey data suggest that half of all specialists do not know what
MACRA is; one-third of those who do know only know MACRA
by name. Researchers suspect that MACRA’s incentives to cut costs
or improve quality are too weak.163 If true, MACRA’s impact seems
ambiguous.
P4P, VBP, and MACRA may thus have represented political expe-
diency and congressional cover to the thorny issue of dealing with the
iron triangle. P4P was a noncontroversial quid pro quo for SGR relief,
VBP was reportedly a euphemism for P4P,56 and MACRA was an obtuse
solution to the doc fix. Such initiatives do not really focus on some of the
desired objectives (eg, patient-centered care) and will likely spur greater
hospital employment of physicians and hospital system formations—
which will increase costs and possibly harm quality. Other researchers
have recently commented that other popular policy solutions such as care
coordination may also represent a politically expedient, but ultimately
unsuccessful, strategy to contain rising health care costs.164
This should be obvious to all: APMs and new organizational models
are not the only, let alone the main, drivers of cost levels or cost growth.
They are also not the main drivers of quality, and they surely are not the
Transformation of the Health Care Industry 89

drivers of health status. Indeed, quality improvement activities typically

are based on process changes in how providers work, not on their pay-
ment or organization structure.37,165,166 The 2-axis solution presented
in Figure 1 may have some value and be easy to remember, but is too
simplistic as an iron triangle or triple aim solution.

Other Headwinds
There are numerous other headwinds. Researchers note that much of the
infrastructure required by ACOs may not succeed in improving quality
or reducing costs.167 There is also no great evidence that providers
are good at other advocated techniques (eg, collaboration). Indeed, some
suggest these efforts be more narrowly focused on the most chronically ill
patients, such as the dual-eligibles and the “poly-chronics” (those taking
5 or more medications, the number of which has been increasing since
1999). Most people are in good health, have few unmet clinical needs,
incur few expenses, and may be uninterested in frequent interactions
with the medical care system.168 Given finite resources, the system
may need to segment the patient population and focus on (1) what
drives spending among the group with the highest costs and utilization,
and/or (2) where the variations in utilization are that are associated with
inappropriate care.
Another headwind is falling hospital revenues. There are many stories
of hiring freezes, layoffs, budget cuts, falling incomes, and losses from
EMR implementation at many top hospitals.169-173 How well financially
struggling institutions can continue to pursue transformation efforts is
uncertain. Some exemplars of ideal organization like Geisinger have
turned away from closed network models of care; weakened reliance on
their own in-house health plan to embrace PPO models; and increased
surgical procedures under an FFS, volume-based model.174

Prognosis and Prescription for

Transformation
In sum, there is only meager evidence that the United States is very
far on either axis of the transformation path in Figure 1, although evi-
dence is stronger for provider reorganization. The movement to APMs
may stall at the stage of bundled payments since physicians do not
want to assume full capitation-based, professional services risk. Instead,
90 L.R. Burns and M.V. Pauly

they may still prefer to be paid essentially FFS but with external penal-
ties and rewards, many of them nonmonetary. A full-throated financial
incentive system relying on individual physicians to respond like profit-
maximizing agents (the core model for APMs) may not be in the cards
any time soon. Moreover, this transformation in payment does not accu-
rately characterize all types of health care, as bundled payments are more
prevalent for certain surgical procedures (ie, orthopedics) but less so for
oncology patients.175 If it does occur, the payment transformation will be
gradual over time and encompass some rather than all medical-surgical
conditions.
Is transformation inevitable? Greater use of APMs may lower provider
reimbursements that occasion more cuts in provider budgets and per-
sonnel that make transformation more difficult to staff and execute.
Hospitals may be forced to shift attention from transformation to basic
“blocking and tackling” cost containment strategies—eg, shortening
lengths of stay, reducing unnecessary admissions by the use of rules
and protocols imposed from above—that hearken back to the efforts by
impolite and unpopular HMOs in the 1990s.
So what are the prospects and what are the options for managing
whatever will come from transformation? One possibility is to anticipate
resignation to a future in which spending continues to outpace income
and quality only holds its own as transformation fails to make an impact.
That this result is heartily undesired by all does not make it impossible.
Spending can continue to grow at its current pace (with at least the
dividend of better new technology) as long as real income grows. The
doomsday prophecy that “medical care costs are increasing so fast that
no one can afford them” is mildly preposterous, since, if no one can
or will spend more, spending cannot rise. There will, following Stein’s
law, eventually be a slowdown, even if at a higher share of spending on
medical care and a lower share on other things than at present.
The challenges in this scenario are two-fold. One is that the intense
desire to change things quickly that cannot be changed may lead to
regulation, frustration, false promises and the associated waste, and
political turmoil that a more realistic evaluation of the prospects could
avoid. Rather than grasping at straws, a policy of keeping an open door
for new innovations (whatever the source) may be superior to planning
what cannot be successfully planned. One feature of such a policy would
be to permit, even encourage, insurers to develop new methods for
allocating resources and organizing physicians without handicapping
Transformation of the Health Care Industry 91

one form or another; let consumer choice in the insurance market work
it out. The other challenge is that we do not yet know the mechanism
by which the inevitable slowdown will be accomplished, with attendant
worry and impatience, until it shall appear.
Another more optimistic view is that a better-targeted strategy than
current policy might work. Rather than focus on replacing FFS pay-
ment to organizations (which has not been shown to accelerate spending
despite its poor reputation), one might focus on 2 things mentioned
above: (1) getting physicians to change behavior and (2) shifting focus
to new technology (rather than fixate on old but stubborn waste that has
been around for years). Here, again, current evidence does not endorse
a particular strategy to deal with these problems, but greater focus on
them, while avoiding prohibitions on rationing or contracting (with
physicians or consumers), might be wise.
A third strategy is to count on small steps. That seems to be all that can be
expected from current transformation models, but perhaps 1 percentage
point lower cost from ACOs, added to a couple of points from bundled
payment, might someday add up to real money. The challenge here is
the limited bite these measures can take out of the “one-third of all
spending is waste.” If these changes could shave percentage points off
spending growth rates rather than levels (what the HMOs of the 1990s
failed to do), that would amount to something over time.
The final strategy is to hope for the big one. We do not know yet what it
might be, but there is always the possibility that someone, somewhere,
will invent a method of payment or management that can slow spending
growth appreciably without harming quality. We suspect that it will
have to affect physicians and technology.
Are there more concrete ways to pursue these options? As part of the
first option, given its prevalence and popularity among physicians, we
may need to stop bashing FFS models and look for ways to retool this
payment method. As noted above, the FFS chassis underlies many of the
APMs now being pushed (including those in MACRA). FFS may perform
better if we diminish the incentive for volume by reducing excessive fee
levels and better linking payment schedules to the underlying total costs
of production.176
With the rapid growth of HDHPs that almost all pay FFS and require
patient consent to bearing the cost, FFS may get a new lease on life. At
present, the ideal of coordinated care fits poorly with consumers paying
something per unit of service. Would consumers be willing to pay
92 L.R. Burns and M.V. Pauly

out-of-pocket for coordinating services? The growth of concierge

medicine suggests the answer is yes, but designing a coordinated care
model that offers the right out-of-pocket payment signals to patients to
seek out and partake in coordination is a serious and so far untackled
challenge.
As part of the second and third options, provider reorganization is
likely a gradual, even glacial, process that gives physicians time to get
used to the idea; it is not a recent, radical change. Trends in larger
practice size and hospital system formation have been occurring slowly
for decades. The problem is that, so far, such consolidation is associated
with higher costs and doubtful improvements in quality, contrary to
what transformation advocates envision. When the bargain-basement
Mayo Clinic or Geisinger emerges, we will know there is hope.

Conclusion
The preceding review is not meant as a negative screed but instead a
critical evaluation of current trends. There can nevertheless be benefits
of a via negativa approach that identifies what we know doesn’t work so
we can focus on the handful of things that might.177 The 2-axis approach
may not be the correct approach to solve either the iron triangle or the
triple aim.
We may need to reorient our attention to other 2-axis solutions that
serve as the bedrock of the health care system. As part of a targeted
approach, the first is the doctor-patient relationship.178 Christensen and
colleagues pointed this out several years ago, predicting that ACOs
could not succeed without changes in the behavior of both physicians
and their patients.179 It is not clear, however, how to get both to behave
and work together better. Practice guidelines may work better than
financial incentives to alter physician behavior, but they suffer problems
with credibility and adoption. Models that assume the sole prod to
greater effectiveness is financial rewards to physicians may need to add
more tools with rounded edges to be acceptable. Some analysts suggest
we focus on changing the mindsets of both the patient and physician
to increase the effectiveness of care, if only we knew the treatment for
mindset change.180
A second 2-axis solution for this focus addresses the complex
physician-hospital relationship.181 Spending variations are higher across
Transformation of the Health Care Industry 93

physicians than hospitals, but we need to target both to reduce wasteful

spending.33 This seems sensible given that most physicians concen-
trate most of their practice in one hospital, but less sensible since PCPs
have less and less to do with the hospital. While the extended hospi-
tal medical staff, and thus the ACO, recognize this truth, they have
not been successful at changing the behavior of either party inside the
institution. Decades-long research on improving physician-hospital re-
lationships has yielded a lot of consistent findings—particularly on the
importance of improving the process of their interactions. However,
findings that leadership and culture influence physician behavior does
not offer much of a guide as to what hospitals can do in the short
term. Delivery organizations with excellent processes—such as Inter-
mountain Healthcare—took decades to develop such capabilities.182
Intermountain is an interesting case to study, since it demonstrates
that successful change may be more gradual, organic, and bottom-up—
rather than dramatic, driven by national policy changes, and imposed
top-down.
The findings that some APMs (like bundled payment) and some
organizational models (like ACOs) derive much of their savings
from spending outside of the hospital’s walls (eg, postacute care and
surgical implants) rather than inside highlight the untapped potential
of this 2-axis approach. Moreover, in most hospitals, physicians are
still subject to the free rider problem in ordering inputs that are
of no cost to them and do not reduce the payments they get—
and some people (more than others) are natural, free-spirited, free
riders.
In conclusion, analysts and advocates may need to come to terms with
the likelihood that the triple aim cannot be achieved over the long term.
Rising real incomes for consumers and technical progress in discovering
health-improving but cost-increasing new technologies may mean that
cutting spending growth rates much further is not a practical goal. We
may need to have more realistic expectations that, for example, the kind
of high-value but cost-increasing care that led to dramatic improvements
in cardiovascular health may be the best we can expect, and along with
these improvements we should expect continuation of spending growth
at an uncomfortable but not breakaway pace. While the middle class
with private insurance may be able to deal with such a future, low-
income people and public programs (even for well-off seniors) may be
harder pressed. Such improvements in net value, even though they fail
94 L.R. Burns and M.V. Pauly

to meet all wishes, should perhaps not be deprecated but celebrated by

the middle class.
The transformation from “volume to value” in health care at this
point appears to be driven more by ideology and aspiration than by
evidence. To date, APMs show limited improvements in quality and
even more limited reduction in costs. If improving quality does not
consistently lead to lower costs but only to better health outcomes, we
need to rethink the triple aim, tolerate a time when we get more health
than wealth, and continue to search for other undiscovered strategies of
cost containment. These might include efforts to modify physician be-
havior, encourage more innovation through Medicare Advantage plans,
and target specific patient populations. This will not come easily. Physi-
cian integration and changing patient-physician behavior are skill sets
that are in short supply and/or hard to acquire. We may also need to
draw more heavily on the numerous experiments conducted over the
past years by private providers (eg, Intermountain) and insurers and
hope to find ways to replicate or franchise them outside their original
setting. We can look at CMS activities (through its Innovation Center)
and be guided by evidence when some work. These realistic strate-
gies are likely to be a better guide than overly optimistic transitional
ideologies.

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Funding/Support: None.
Conflict of Interest Disclosures: Both authors have completed and submitted the
ICMJE Form for Disclosure of Potential Conflicts of Interest. No conflicts were
reported.
Acknowledgments: An earlier version of this paper was delivered as The Midland
Lecture at Ohio State University in March 2017. The authors thank the editor
and 3 anonymous reviewers for their helpful suggestions.

Address Correspondence to: Lawton R. Burns, Department of Health Care Man-

agement, The Wharton School, 3641 Locust Walk, Philadelphia, PA 19104
(email: [email protected]).

Supplementary Material
Additional supporting information may be found in the online ver-
sion of this article at http://onlinelibrary.wiley.com/journal/10.1111/
(ISSN)1468-0009:

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