ACOs: What Will They Really Be?

June 27, 2011

Sixty-five quality indicators? Retrospectively attributed patient populations? Risk after the fact? Significant management and financial investment required with uncertain payback?

This may not sound like a strategy to win the hearts and minds of providers who are on the fence about whether or not to participate in CMS’ new approach to care: accountable care organizations (ACOs). So, what is going on?

Well, first a little background. Several events coincided to encourage CMS (and some private insurers) to embrace the ACO concept.

To begin with, years of research done in connection with the Dartmouth Health Care Atlas led some researchers to advocate for a model similar to ACOs. For many years, Dartmouth noted the tremendous variation in use of health care services in the country. In this context, they also looked in more detail at the use of services by types of institutions and noted that some systems (generally, academic medical centers) were better at managing care than others – especially when looking at the experience of the entire case and not just the cost per day of care. These institutions had lower rates of complications and readmissions – making the episode of care lower cost than those at other institutions where the quality indicators did not look as good. The idea of rewarding hospitals and physicians who work together in an integrated manner and encouraging others to create such structures became formalized in the ACO framework.

The concept was also attractive to those who had observed that the fee for service structure was not effective at managing the cost of care, but knew that managed care systems – popular with employers in the mid-1990s – were not popular with patients. The ACO concept was designed as a mid-point – a system that attributes patients to provider entities, holds providers accountable for the care of the attributed population, but doesn’t make the patients choose anything. From a patient’s perspective, they get care as they always have – with perfect freedom to choose the provider they want – and all of the “management” occurs behind the scenes.

Finally, the concept also coincided with Don Berwick’s move to head the Centers for Medicare and Medicaid (CMS), bringing a concept he championed at IHI: Triple Aim. In Triple Aim, an entity (a provider, or payer, or government) takes responsibility for population health and tries simultaneously to improve population health and patient experience while lowering health care spending. The ACO concept would seem to be a good model for testing whether or not these goals can be achieved – with the right incentives. And, the already-extant CMS Physician Group Demonstration project would seem to be a good project to build upon.

The challenge of ACOs, however, is that they are an entirely unproven concept and it is completely unclear whether or not they could really be structured in an environment that includes community hospitals and independent physician groups – not just academic medical centers.

There is no question that integrating care across practice settings (hospitals, offices, nursing homes) has the potential to improve both the quality and the efficiency of care. The question is, however, in an environment as fragmented as the one we have today, will a strategy like ACOs (as articulated to date by CMS) really get us there? And, if tightly managed care networks that required patients to select and stick with a primary care physician didn’t work, how likely is it that a loose structure like ACOs can really improve care such that the “juice is worth the squeeze”?

All of this is, of course, unknown. And, perhaps that is why CMS chose a route in its interim regulations that wasn’t very popular with providers. Maybe, in the end, CMS doesn’t really want too many participants as they move down this uncharted path.

But, the optics are important here. Since every provider and their brother announced that they are, in fact, ACOs – long before the term was defined by CMS – having significant providers saying they won’t be (e.g. Mayo), could be a serious setback for the future of this concept.

Only time will tell, of course, and Paul Ginsberg has given an elegant defense of the CMS rules here. But, if I were a betting person, I would say the odds are long that the ACO model articulated to date will have the kind of broad sweeping impact that early proponents hoped it would.