Throw a rock, hit an ACO. That's the way things have been going for the past couple of years, as hospitals and doctors form ACO partnerships and insurance companies scramble to set up contracts with the best-positioned groups.
What's odd about all of this, though, is that the healthcare industry has plunged into the ACO business without taking time to make sure the model was truly baked. After all, like the HIE before it, the ACO model has been developed on the fly, driven by unproven if tantalizing assumptions about the impact it can have on healthcare delivery. It seems many healthcare players have decided to just swim with the tide, afraid to be left behind.
So the net result is, we've seen an explosion of activity that may or may not be in providers' best interest. After all, it's not clear which variations of the ACO deliver the best results, what matters to employers in ACO contracts or what providers may have to invest in capital or staff time to make the ACO relationship successful. Fearful of being stomped to the ground by market forces if they don't partner or merge, providers are hoping for the best rather than having any real sense of how their ACO deal will work.
The house always wins?
While providers may collect some nice incentive payments, health insurers arguably have the most to gain from ACO success. I don't have concrete evidence in hand, but look at it this way: Who's more experienced at making money on risk than big insurance companies? As I see it, it's like the old truism about gambling—while players may see some payouts or even the occasional big prize, the house always wins in the end. And health plans are most decidedly "the house" in these deals.
It's no surprise, then, that health plans are scaling up their ACO deals dramatically. Every week you hear about the latest ACO deals by the big health insurers. UnitedHealthcare, for example, announced last summer that it would double its number of ACO contracts over the next five years, which should represent more than $50 billion in reimbursements by 2017. (As of last July, the insurer had already cut ACO deals with more than 575 hospitals, 1,100 medical groups and 75,000 physicians.)
And of course, health plans are touting their early successes loudly. Consider the recent news from Independence Blue Cross of Philadelphia, which just announced that during the first full year of its ACO program, half of participating hospitals cut costs for its members, 90% of hospitals lowered the readmission rates and improved control of hospital-acquired infections. The idea is to turn ACOs into the norm no one dares oppose.
But while they still can, hospitals and doctors should take the time to look at whether they really want to throw their destiny in with a health plan and multiple provider partners. They should consider whether they want to develop the IT infrastructure and invest the capital and human resources to take on risk. More importantly, they should explore alternatives such as building out their services to become best-of-breed service providers to the ACOs rather than being swallowed whole. If they don't take action now, they may be stuck making deals they'll regret.
Want to read more? You may enjoy this story about how one insurer exposed Medicare ACOs' biggest flaw.