Accountable Care Organizations: Early Results and Future Challenges

Elsewhere in the country, Cigna’s Collaborative Accountable Care model was rolled out in 2009 with provider organizations in New Hampshire, Texas, and Arizona. A one-sided shared savings contract, it features a care coordination fee that is counted towards a practice’s medical spending, helping fund registered nurses who work as care coordinators. Interim results in 2012 suggested cost savings and quality improvements, but they were not statistically significant [30].A two-sided contract between Blue Shield of California and the California Public Employees’ Retirement System slowed medical costs by shortening admission and reducing readmissions [31].Most recently, an accountable care partnership between Anthem Blue Cross and HealthCare Partners physician group in California claimed $4.7 million in savings in the first half of 2013 for 55,000 patients in preferred provider organization (PPO) plans [32].These savings were driven by an 18% reduction in inpatient days, 4% reduction in overall admissions, and a 4% reduction in visits for radiology and lab tests, although specific price and volume contributions are yet unknown. Similar to the AQC, the Anthem contract is a 5-year agreement. Unlike the initial AQC contract, shared savings were tied to meeting a quality threshold and HealthCare Partners did not bear downside risk in year 1 [33].

Lessons Learned

Strengths of the ACO Model

Evidence to date points to both the potential of ACOs to slow spending and improve quality, but also the significant obstacles that they face. One of the encouraging lessons so far is that quality of care need not be threatened by a contract that rewards savings, provided that meaningful incentives for quality are in place. In both public and private two-sided contracts, process quality seemed to consistently improve. However, less is known about performance on outcome measures, which is ultimately a more meaningful metric for patients.

Broadly speaking, ACO contracts may be able to induce changes in physician behavior that could lead to medical savings. The low hanging fruit in Medicare seems to be admissions and readmissions, while that in commercial contracts may be lower prices obtained by changing referral patterns. While these medical savings reveal changes in clinical decision-making, it is still poorly understood whether clinical choices geared towards higher value can extend to areas of utilization where wasteful care may be concentrated. Little is also known about whether an ACO’s physicians and hospitals are in agreement over these changes in utilization or referral patterns, given their consequences for referral business and admissions. Moreover, there has yet to be evidence suggesting that medical savings can be larger than non-claims payments (rewards and bonuses to the ACOs) in a given year, generating net savings to the health care system. This may well take time to materialize given the initial investment costs and inducements for provider participation embedded in the early year incentives, but it is an important metric of success.

ACOs serve as a vehicle for payment reform and organizational reform among providers. They bring physicians across specialties and hospitals together under the same contractual roof, allowing the organization to determine how it allocates its resources under the spending target. Historically, policies aimed to slow health care spending have focused on either cutting prices (provider fees) or constraining volume (gatekeeping, prior authorization, and utilization review, etc.), but both types of strategies have been complicated by unintended consequences. Medicare fee cuts have traditionally been followed by compensatory increases in utilization or intensity of coding, offsetting the intended savings to a significant degree [34–37].Managed care techniques have met resistance from both physicians and patients [38,39].A spending target or budget takes an alternative approach; rather than controlling prices or quantities directly, it seeks to control total spending. Although the underlying fee schedule is retained for accounting, a spending target or especially a global budget pushes the organization to decide what care is high or low value.