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Medical care networks touted for savings

A new approach to medical care could mean higher quality and less risk for patients while saving millions of dollars for taxpayers, the Obama administration said Thursday.

The administration's plan involves accountable care organizations, which are networks of hospitals, doctors, rehabilitation centers and other providers. They would work together to cut out duplicative tests and procedures, prevent medical errors and focus on keeping patients healthier and out of the emergency room.

"We need to bring the days of fragmented care to an end," Health and Human Services Secretary Kathleen Sebelius said as she announced a proposed regulation that defines how the networks would operate within Medicare.

If things work out, medical providers would share in the savings. If the experiment fails, they'll get stuck with part of any additional costs.

Sebelius said early estimates are that Medicare could save as much as $960 million over three years. That's not a lot for a $550 billion-a-year program, but officials say it's a start. The estimate was prepared by Medicare's Office of the Actuary, known for its independence.

Eagerly awaited by the health care industry, the new approach was called for in President Obama's health care overhaul. The first Medicare networks would open for business next year. Unlike some managed care plans, such as health maintenance organizations, these networks would not lock in patients.

The United States spends about $2.5 trillion a year on health care, more per person than any other advanced country. Yet people in the United States lag in some common measures of health and well-being.

Researchers estimate that as much as one-third of U.S. spending goes for services that aren't really needed, and that's what the networks are supposed to address.

If the idea succeeds in Medicare, it is expected to spread quickly to employer-provided health insurance.

But there are risks.

The networks could end up costing more money because of the intensive work involved in coordinating among different providers.

There's another potential problem. What if a network of hospitals and doctors acquires monopoly power in its community and starts raising prices?

Assistant Attorney General Christine Varney said the administration won't allow that to happen.

"We believe there is no area of the economy that can benefit more from collaboration than health care," said Varney. "Those who collaborate to fix prices inappropriately will be prosecuted."

Doctors, hospitals and other service providers will decide whether join a local network. They will have to make a three-year commitment to care for a group of at least 5,000 Medicare patients.

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