5 Observations on ACOs

Five thoughts and observations on the current state of the accountable care organization model.

The accountable care model continues to grow as more hospitals, health systems and physicians embrace the transition to value-based care. Leavitt Partners estimates there are now 606 government and private-payer accountable care organizations with the addition of 123 new Medicare Shared Savings Program participants in December.

CMS may even be considering expanding the model further: In December, the agency issued a request for information to gauge organizations' interest in joining the current Pioneer ACO program.

While the ACO model is poised to continue developing and strengthening, here are five observations on happenings in the ACO landscape so far.

1. The model has yet to show excellent results. Despite the fact that organizations continue to join the Medicare ACO programs and are entering into new, value-based contracts with commercial payers, there is still not a lot of solid proof that the model really works.

For instance, though Pioneer ACOs all improved on quality metrics in the first year, updated numbers from CMS show that just nine Pioneers had "significantly lower spending growth relative to Medicare fee for service." Additionally, only 29 of the 114 ACOs that joined the Shared Savings Program in 2012 generated enough savings to share in them with Medicare in their first year, according to CMS. But, all together, the shared savings and Pioneer programs saved Medicare $380 million in their first year.

David Muhlestein, PhD, director of research with Leavitt Partners, estimates that only about 10 percent of current ACOs have released solid reports on their results, and many organizations are likely to wait to make the ACO transformation until more information is available on if accountable care really works.

2. A large number of ACOs are physician-led. Physician groups are now the primary sponsor of ACOs, according to Leavitt Partners' analysis. This trend started even with early Medicare ACOs, as just 46 percent of organizations that joined a Medicare ACO program before fall 2012 involved a hospital, according to a Commonwealth Fund study. Of the ACOs that did have a hospital, the typical participant was a large, nonprofit teaching hospital.

This trend toward physician-led ACOs has to do, in part, with the hesitancy shown by hospital and health system executives to jump into the model: 46 percent of them have no plans to form an ACO or implement a similar model in the near future, a Purdue Healthcare Advisors survey found.

Though this development may be surprising, some experts think physician-led ACOs will ultimately be more successful than those governed solely by hospitals and their administrators. Two experts from Permanente Medical Group, for example, contend ACOs will only thrive when physicians lead or share governance in the model.

3. States are shifting to ACO-like models for Medicaid population. Most of the growth in the ACO model has been in Medicare and commercial payer space, but several states are looking to the ACO model to improve care and lower cost for its Medicaid population as well.

Oregon is ahead of the curve in this aspect: the state has 16 coordinated care organizations — Medicaid ACOs — that cover roughly 90 percent of Oregon Health Plan members. The organizations have been successful in curbing patients' visits to the emergency room, and enrollment in patient-centered primary care homes has grown 51 percent since 2012.

Utah and Colorado have also begun this movement on a large scale, and other states have made announcements that they will do the same in the near future. The Medicaid ACO model is attractive to states because it shifts some risk onto private entities with some guarantee the quality of care provided will remain steady or improve, according to a Health Affairs blog post.

4. ACOs haven't led to increased consolidation. Hospitals have been acquiring physician groups at a rapid pace recently: Acquisition of medical groups saw 139 percent growth from 2010 to 2011, according to a 2013 Deloitte report. However, growth in this area has not been driven by ACO formation, according to Dr. Muhlestein.

Partnerships between hospitals and physician groups have formed to create ACOs, but they are more in the form of joint ventures or physician-hospital organizations.

A notable exception is with St. Luke's Health System in Boise, which acquired Saltzer Medical Group in Nampa, Idaho, in 2012 so both groups could better practice accountable care, David Pate, MD, JD, president and CEO of St. Luke's, told Becker's Hospital Review in October 2013. However, the acquisition faced an antitrust lawsuit and a federal judge ruled the system must unwind its acquisition. The judge said "there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs."

5. Limited movement toward full risk for providers. When the model was first created, many speculated that ACOs would move to a full capitated payment quickly, but that "really has not been the case," Dr. Muhlestein says. Instead, most ACOs are built around a shared savings model, so providers are still being reimbursed on a fee for service basis.

In fact, the top reimbursement model for ACOs is fee for service with care coordination reimbursement and shared savings: 37 percent of ACOs use this reimbursement model, according to a survey conducted by Healthcare Intelligence Network. Just 3.7 percent of respondents said they had a bundled or episodic payment reimbursement model in their ACO.

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