This article appears in the May 2012 issue of HealthLeaders magazine.
It seems like each week brings yet another announcement about some combination of physicians, hospitals, and even health plans that are forming collaborations or partnerships, and calling them accountable care organizations. The ACO moniker carries a lot of weight these days. It signals that providers and payers are committed to coordinating healthcare to achieve the vaunted triple aim of improving the experience of care, improving the health of populations, and reducing per capita costs of care.
It's estimated that there are 160 commercial ACO or ACO-like organizations at some stage of development right now, according to Leavitt Partners, a Salt Lake City–based health intelligence business. Add to that the 32 Pioneer ACOs named in November 2011 and the 27 Medicare Shared Savings Program ACOs named in April by the Centers for Medicare & Medicaid Services, and still more are expected to be named later this year.
Aside from the healthcare reform legislation, among the factors driving interest in ACOs is industrywide acceptance that the current system is simply unsustainable. "Our transaction-based system doesn't make sense," says Hal Teitelbaum, MD, the CEO and managing partner of Crystal Run Healthcare, a 250-physician group in Middletown, N.Y. "We're not in the business of selling mammograms or colonoscopies. We're in the business of improving health and outcomes."
Others are looking to ACOs to help push more of their revenue stream into a value-based model. "Living with a bunch of different payment models is challenging," explains Chuck Lehn, vice president of managed care for Banner Health, a Phoenix-based system with 23 hospitals in seven states. "We think getting paid for adding value will make it easier for us to have a more rational system." The system formed Banner Health Network, an ACO that is involved in commercial projects with Aetna and Health Net as well as Medicare's Pioneer ACO program. BHN includes Banner Health–affiliated physicians, 13 Banner hospitals, and other Banner services in Arizona.
And some players are approaching commercial ACOs from a defensive posture. Andrew Croshaw, a partner at Leavitt Partners, notes that uncertainties remain as to the extent of the ACO movement and when it might mature. To protect their negotiating strength, some hospitals are making acquisitions to expand their care continuum and increase their leverage with payers; Croshaw points out that these services will be useful to have as the ACO movement matures, but in the meantime it positions hospitals to negotiate more strongly with payers.
Whatever the motivation, C-suite executives across the payer and provider sectors of the industry are considering how they should approach this opportunity. Whether your organization is ready to jump on the ACO bandwagon or is still trying to figure out if it's the right move, here are some of the key questions your leadership team needs to consider.