Hard to get excited about Accountable Care Organizations

Accountable Care Organizations (ACOs) are supposed to control costs and improve quality under the Patient Protection and Affordable Care Act. Everyone seems to be maneuvering toward creating or participating in an ACO, even if no one is quite sure what exactly they will be. From what I observe these are mainly going to be extensions of hospital-dominated integrated delivery networks taking global capitation and getting bonuses for quality.

Two articles in the latest New England Journal of Medicine reinforce my pessimism about these entities.

In Physicians versus Hospitals as Leaders of Accountable Care Organizations, the authors discuss whether hospitals or physicians will lead ACOs, pointing out that whoever is in the lead will emerge financially stronger, weakening the other group. The authors make it sound like a toss-up over which side will control ACOs. The authors note that doctors will have to overcome barriers including collaboration and divvying up resources among primary care and specialists. They will also have to invest capital in information technology and other infrastructure. Hospitals meanwhile will have to trade short term revenue for long term growth and focus more on outpatient services.

I think the hospitals will overcome these barriers a lot more readily than physicians. I expect hospital-led ACOs to bulk up with acquisitions and affiliations to improve their negotiating position with payers. In many markets one player will dominate, which won’t be good for costs.

The other article, Patients’ Role in Accountable Care Organizations points out that patients won’t be assigned to a particular ACO explicitly, and  suggests that policymakers create incentives to keep patients within one ACO. They suggest tiered networks, lower premiums for patients who choose a given ACO and assigning patients to certain ACOs as a default choice. All of these things should make ACOs more efficient. But as the authors point out:

Although minimizing “leakage” of the population for which an ACO is accountable may be important for coordinating and integrating care, there will always be some patients who would obtain more effective care by turning to multiple ACOs. More than half of Medicare beneficiaries have five or more chronic conditions that may be treated separately or in combination. Although some successful integrated systems provide efficient, high-quality care for multiple conditions, often the best cardiac care providers in a given market, for example, are not in the same system as the best orthopedic care providers.

Nevertheless the authors seem to think it a good idea to keep patients within a given ACO.

IDNs I’m familiar with already do a lot to prevent so-called “leakage.” My primary care provider is part of BIDMC/CareGroup and has strong financial incentives to refer within the system. In addition, non-interoperable information technology is used as a barrier to going outside. In my case that’s been fine but it means that plenty of patients are never told about choices outside the IDN that may be better in their specific instance.

What I’d prefer as a patient would be a virtual ACO. A concierge-style primary care physician practice would be paid to guide my care. My PCP would be able to work with any specialist, hospital or lab in Boston (or elsewhere) that he thought best for me and would have the right set of tools to help me choose where to go and what to have done. Seamless integration of electronic health records –with a focus on my personal health record– would make it possible to move around without crippling the ability to share my medical information.  That kind of approach would start to starve the specialists and hospitals of easy revenue and might force them to compete on efficiency, quality and customer service. My PCP would receive risk-adjusted capitation for my care and bonuses based on optimal use of resources and my level of satisfaction.

Sure that’s hard to define and operationalize, but I’d take it any day over being forced into one IDN where it’s considered “leakage” if I go elsewhere.

November 10, 2010

5 thoughts on “Hard to get excited about Accountable Care Organizations”

  1. Isn’t this just HMO redux? I remember the discussion years ago that HMOs were going to control costs by making providers accountable (remember capitation & IPAs) but when the public caught on that their doctor made money by withholding services HMOs blew up. Aren’t we looking at the same thing regurgitated with a new name?

  2. To David’s and Leon’s point. David first.

    Today’s lead NEJM on-line article correctly draws the battle lines. I agree that hospitals have the edge in many, perhaps most, geographies today. And hospitals have the capital to support some of the systems requirements of ACOs. (Although many also have serious debt problems). And Hospitals also are currently on an MD buying spree. But hospitals generally have a very very bad bed over-supply and cost problem, as well as dismal record in managing MD productivity. This is likely to make ACO performance very difficult. And when hospital-based MD incomes are squeezed further, the pendulum will swing back to private practice. And more capital will move from hospitals to entrepreneurial MD groups.

    To Leon. ACOs are not a 2010 version of HMO. The problem in the early 90s was not withheld care, although that occurred in a few widely-publicized California cases; it was the absence of quality measurement capabilities. HMOs of that era provided contracts that made doctors responsible for cost, but not accountable for quality. Very good data is collected at e-speeds today, which enables the shift of both cost and quality risk to doctors. The folly of fee-for-service – beyond the obvious incentives to providers to pump up the volume and provide too much care – is that doctors have no incentives to coordinate care or provide better quality. ACO risk contracts require outcomes measurements and quality scores; those who provide better cost-effective service should and will make more money than the poor performers. and the low performers should be outed using data transparency.

    The other big change from twenty years ago is that the real payors – employers and government – are out of money to throw at the problem; employee health benefit costs threaten net income like never before, and govt debt is…well… ask the bluedogs licking wounds or dead. Combined with the addition of another $1.5 trillion of annual healthcare spending, the shift of risk to providers is the only option left. (Note: the shift to the ultimate payor – 300 million consumers, or taxpayers – was derailed by ObamaCare… that’s another conversation).

  3. ryderjack, thank you for the cogent explanation of ACOs. As a professional who sold and implemented physician IT systems in California in the 80s and 90s I don’t accept your caricaturization of what happened to HMOs back then. Your theoretical hyperbole regarding outcome measurements and quality scores sounds very familiar. I don’t share your faith in government systems that can authorize spending billions of dollars but takes over two years just to decide the meaning of “meaningful use”. I personally see former (physician) client/friends running like roaches escaping the boot heel of government or just giving up and retiring. I believe that the PCMH is the better solution and ACOs just being more smoke blowing, you know where. Thanks again.

  4. Leon. We agree. I didn’t imply any faith in govt-directed systems. I have none. But the non-gov marketplace is spawning a spectrum of risk deals, from PCMH (which I like alot, as long as panel size is sufficient, and risk-adjustment is applied), through partial cap, on to full blown ACOs. Outcome measures are not hyperbole; data mining can now find high risk patients, profligate referral patterns, gaps in care, bad care, etc., giving well-managed IDSs, IPAs, and MD groups the upper hand against payors. That wasn’t possible ten years ago.

  5. That sounds an awful lot like Hal Luft’s proposals which I first heard about on Matthew Holt’s Health Care Blog.

    It seemed to get a good review in Health Affairs, but it doesn’t seem to have caught on much elsewhere.

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