Practice Economics

Large Hospital Systems, Physician Groups Most Likely to Form Accountable Care Organizations


Environmental Shift

The environment that breeds the formation of accountable care organizations (ACOs) includes large integrated hospital systems, primary care physicians (PCPs) practicing in large groups, and a greater fraction of hospital risk sharing, according to a Health Affairs report (

In other words, institutions and areas that have begun embracing risk-based or population-based payment models are more likely to spur the formation of ACOs, which have similar risk-reward payment structures.

For hospitalists, knowing the conditions that help foster ACOs may be an important first step in pushing for development and continued growth, says Ron Greeno, MD, FCCP, MHM, SHM Public Policy Committee chair and chief medical officer of Cogent HMG in Brentwood, Tenn.

It’s a shift in mindset for sure, says the report’s lead author.

“The traditional model is pretty much fill your beds with high-paying patients. An ACO is really a different kind of concept,” says David Auerbach, MS, PhD, of Boston-based RAND Corporation. “A hospital that doesn’t have any experience thinking in a different way is going to find it hard to accommodate the ACO payment model. But hospitals that do…probably have staff that have thought about this and already started to move down the path to thinking about ways to reduce their costs.”

Regional Variance

Dr. Auerbach, a policy researcher and affiliate faculty member at Pardee RAND Graduate School, says further work needs to be done to identify “key regional factors” that induce certain physicians and hospitals to launch ACOs. His paper, “Accountable Care Organization Formation Is Associated with Integrated Systems but Not High Medical Spending,” found wide disparities in ACO formation; the model is popular in the Northeast and Midwest regions but scarcely found in the Northwest.

It’s basically what happened when HMOs started paying capitated payments to physician groups. The groups then had X amount of dollars to care for their patient population, and if they couldn’t make that work, they went out of business or were acquired by more successful groups.

—Ron Greeno, MD, FCCP, MHM, SHM’s Public Policy Committee chair, chief medical officer, Cogent HMG, Brentwood, Tenn.

The authors reviewed 32 Medicare Pioneer ACOs, 116 Medicare Shared Savings Program ACOs, and 77 private-market entities very similar to ACOs. The study’s multiple-regression analysis found that in the 31 regions with at least 20% of Medicare fee-for-service beneficiaries in an ACO, more than half of hospitals had a joint venture with doctors or physician groups and were affiliated with a health system. In so-called “low-ACO areas,” that percentage hovered around 30% to 40%.

And while much of the policy discussion focuses on whether ACOs can rein in healthcare spending in some of the markets where care costs the most, the study reported “no strong pattern in the relationship between ACO penetration and Medicare spending or spending growth.”

Uncertain Upside

Dr. Auerbach says that while the results of his paper did not surprise him, he hopes hospitalists and others use them educationally.

“We might think about there being demand from people in other areas that might say, ‘I want to be a part of that too. Why aren’t there any ACOs that I can be in?’” he adds. “And so a study like this says, ‘Here are some of the things that seem to be important.’ If there’s not this kind of infrastructure in your area, as a policy maker, you could go and say, ‘Let’s try and give a boost to some of these factors or proxies for these things.’”

Part of that review would include looking at those areas that saw higher rates of physician-institution consolidation and figuring out what the motivations were. Typically, the impetus of forming larger groups is partly explained by a desire to negotiate with insurers and get better deals, Dr. Auerbach says. But with more coordinated care comes a more efficient system that can offset those lower rates.

“I think right now most policymakers are not sure if the upside is better than the downside,” he adds. “I think the answer, personally, is not to try to break up providers and do a lot of anti-trust activity. We need to understand whether, and how much, integrated groups are able to use market power to charge higher prices. And, if they do, there may be other ways to combat that problem while keeping the groups intact.”

Rethinking Reimbursement

Dr. Greeno says growing pains are inevitable along the way, particularly because the move to the ACO payment model is a seismic shift for a healthcare industry that has traditionally been based on a fee-for-service model.

“How we pay for healthcare in this country is going to be completely flipped on its head,” he says. “Part of the goal, of course, is better outcomes for patients. But it’s also cost efficiency. In the meantime, the entire system for 100 years has been paying for production.”

Dr. Greeno compares it to the shift that was the managed-care movement. Moving forward, the shift will create winners and losers and most likely will result in massive consolidation of healthcare organizations—from nearly 700 today to what Dr. Greeno believes may be 50 to 70 mega-providers.

“It’s basically what happened when HMOs started paying capitated payments to physician groups,” he says. “The groups then had X amount of dollars to care for their patient population, and if they couldn’t make that work, they went out of business or were acquired by more successful groups. If they could make it work, then they survived. It’s the exact same thing. It’s not quite as dramatic, as it is not going to happen overnight, but that’s where it’s heading.

“And instead of occurring in pockets around the country like in Southern California and Minneapolis, it’s going to be nationwide, and the world’s largest insurance company, which is Medicare, is driving it.”

Dr. Auerbach notes that while the disruption already has caused some groups to drop out of the ACO programs, he does not see that as a precursor to more organizations turning away from the program, particularly as it is among the key planks of the general healthcare reform movement.

“It is part of a larger wave that really is changing the way we do healthcare,” he says. “I think that as [ACOs] grow...people are going to say that this is becoming something like the dominant form of delivering healthcare.”

Richard Quinn is a freelance writer in New Jersey.

Next Article:

   Comments ()