6 Ways ACOs Differ From HMOs

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At first look it may appear that the underlying principles of accountable care are nothing more than a rehash of the managed care experiments of the 80’s and 90’s. ACOs do indeed mirror many characteristics of HMOs, including managing risk, building physician networks, promoting the health of its members and targeting resource utilization. A fear often expressed by ACO skeptics is that they will morph into HMOs, using denial of service as a hammer to drive profits.

ACO founders and CMS rule-writers are diligently working to avoid the mistakes of history. Proposed guidelines take advantage of the beneficial elements of HMOs while avoiding its pitfalls.  

Here are six ways ACOs differ from HMOs:

1.  ACOs are about creating value, not withholding service. Although cost reduction is initially driving accountable care, quality and patient satisfaction are essential components. ACOs are intended to provide more service, not less, by shifting the value curve to emphasize health-promotion while migrating away from high-cost, high-risk settings.

2. ACOs are local. Where HMOs created large bureaucracies that layered in cost and complexity, ACOs are designed to directly manage healthcare in small, manageable settings. Although a certain level of infrastructure is required, the intent is to keep ACOs simple and local.

3. Incentives are aligned. HMOs invested in improving the health of members without reaping the long-term benefit. For ACOs, financial upside is more immediate, derived from shared savings against a pre-determined target.  Reward comes from driving out cost and providing health-promoting services with annual shared savings payments.

4. Physicians are now more accepting of integration. Managed models require significant physician collaboration.  In the 80’s and 90’s, physician practices were predominantly solo and small groups. Today’s generation of physicians are expressing a greater willingness to integrate. Emerging graduates welcome the predictability of employment. Large groups and integrated systems are now commonplace, well accepted across the industry.

5. ACOs offer an array of payment models. The capitation payment model assumed global responsibility for the cost of care and managing down. This runs counter to the physician impulse for fee-for-service where they are rewarded for working harder and doing more. Managing to a fixed payment feels unnatural. ACOs offer a variety of payment mechanisms, including a strong fee for service component. When combined with shared savings, this offers the best of both worlds.

6. Information technology has transformed the capability for population health management. The sophistication and prevalence of information systems that integrate clinical and financial data has advanced dramatically. Automated tools required to manage patient populations now allow ACOs to aggregate data and use information to understand trends and impacts. This did not exist in the era of managed care.

Accountable care is fundamentally different from managed care. The intent is not only to manage down costs, but create team-based approaches to delivering care that improves health and thus enhances value. The jury may be out on the effectiveness of the model, yet planners are careful to learn from the mistakes of the past.

Learn more about West Penn Allegheny Health System.


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