State of the Industry: ACO models

October 1, 2013

Physician-led models seem to have an advantage

The first year experiences of the Pioneer Accountable Care Organizations (ACOs) showed mixed results. Only one-third of the 32 in the pilot reduced costs. However, all of the participants met the quality performance metrics.

 “When the Medicare ACOs are redesigned properly, they can save money,” says Don Crane, president and CEO of the California Association of Physician Groups based in Los Angeles. “The Shared Savings Program with its fee-for-service model has an inherent flaw; it provides an incentive for providers to churn.”

He suggests switching to a global capitated model to solve the problem.

Doug Chaet, senior vice president, contracting and provider networks, Independence Blue Cross based in Philadelphia, and an MHE editorial advisor, agrees with Crane that ACOs have the potential to rein in healthcare spending growth.

“Some ACOs will save money because the new organizations are structured to enhance quality, lower costs and develop high-level coordinated care, which is often missing among providers,” he says.

Chaet emphasizes the need to develop an ACO structure that provides engagement, support and tools. He recommends a combination of price and quality data and information technology to engage providers; incentives for providers to promote care coordination and for members to select more experienced providers offering the same or better quality services at a lower cost; and an investment in infrastructure.

To be successful, ACOs need to use a population-based, prospective system with incentives, Crane says, and the initial ACO pilot needed more patient engagement.

“Many patients don’t even know they are in an ACO. It should be a voluntary, opt-in program with incentives or mandates for members to stay in the ACO network,” he says. ”If they migrate outside, it is difficult to manage costs and quality, and coordinate other services.”

On the other hand, Crane says the results for the commercial ACOs in California, with which he is familiar, have had success. He attributes their performance to an HMO foundation that by design, encourages members to use services and providers within closed networks.

Crane says unequivocally that physician group-sponsored ACOs are on the surest road to success with their capitated, centrally managed structure. While he acknowledges that plan-sponsored ACOs and physician/hospital partnerships can also work well, he is more reticent about putting his money on hospital-led ACOs. He believes health systems have little incentive to reduce the use of expensive services.

“Historically, physician-driven structures have had the most success in reducing unnecessary medical costs,” Chaet says. “The reason may be that most of the savings comes from a reduction in facility expense. For physicians in a successful performance-based contract, this means increased reimbursement because they now become eligible for a share of dollars that previously flowed to the hospital. For hospital-sponsored entities, successful performance may mean a net reduction in revenue for the facility.”

According to the Centers for Medicare and Medicaid Services (CMS), about 50% of Medicare ACOs are physician-led organizations that serve fewer than 10,000 Medicare beneficiaries.