"They made a number of changes. They made a number of modifications. But nonetheless, the overall governance and reporting structure, the participation requirements, those remain largely unchanged," Kelly says. "As a result, for a hospital or system to put together an organization that would meet those requirements where the potential return would be greater than the cost, we think many will do the calculation and determine that, at least for now, this is not the direction they want to go down."
ACCESS. INSIGHT. ANALYSIS.
Join the HealthLeaders Media Council
Get members-only access to industry-wide intelligence, forecasts, and analysis positions your organization to benchmark against your peers, identify and respond to key trends shaping healthcare, and make sound business decisions.
Even with the concessions, Kaufman says ACOs remain fundamentally flawed because patients have "no skin in the game," and are free to go to other healthcare providers, which could bust an ACO's budget because they're held accountable for containing costs.
"The history of HMOs is if the patients don't have skin in the game, even though they know they are a member of the HMO and their primary care gatekeeper is a member of the HMO, if they don't have penalties for leaving the network, 20% to 30% of their care seems to get provided by out-of-network providers," he said.
In addition, he noted, hospitals that try to establish ACOs could risk alienating their specialists, who stand to lose when ACOs succeed in reducing hospital admissions.
"My advice to my clients is the best thing that could happen to them would be that their competitors do an ACO," he said. "Because the upfront investment in infrastructure will deplete their capital and then the political capital that they will have to invest to convince their specialists to participate in a program that potentially could reduce the specialists' revenue is going to drive the competitor's specialists to your hospitals."
Another problem, many observers say, is the sheer number of healthcare reform initiatives already underway, or soon to be launched. These include bundled payments, ICD-10, meaningful use, and value-based purchasing. All of this change is coming during a weak economy, with gridlock in Washington, DC, and with the possibility that the Affordable Care Act could be repealed if a Republican wins the White House in 2012.