A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform Bill

Filed in Hospitals, Physicians by on March 11, 2010 37 Comments
Photo by takomabibelot via Flickr

Photo by takomabibelot via Flickr

[Ed. Note, April 24, 2011: This article by Jordan Cohen was written in March, 2010. It has been cited and linked by everyone from the New York Times to the Texas Tribune and all points in between– for good reason, it is both thorough and informative. But since the Accountable Care Organization (ACO) model  has continued to gain coverage and currency, we believe it worthwhile to point out recent HRW pieces that will help you get caught up on ACO implementation and impact after you finish the overview of ACOs discussed below. These include:

The accountable care organization has been a model for health care reform, yet its modest success has been limited to a handful of health care systems across the country. However, the accountable care organization model has recently taken on far greater significance since being introduced as one of Medicare’s pilot programs in the Senate’s health reform bill.

The phrase is attributed to Dr. Elliot Fisher of Dartmouth Medical School.  Dr. Fisher has led the Dartmouth Atlas Project — a project that has, for the last 30 years, painstakingly documented the variation in care across the United States. (Click here for an interactive map of some of the Dartmouth Atlas results). The Dartmouth Atlas has focused on both the quality of health care as well as its cost. More importantly, they have reported on the relationship between the two, and their findings are nothing short of an indictment of our current paradigm.

Specifically, their findings illustrate that there exists wide variations in the cost of care across the country, and profoundly, that the regions that spend more per patient do not necessarily obtain better outcomes. So what to do? Dr. Fisher believes he has found at least part of the answer: the Accountable Care Organization, known as an “ACO”.

What is an ACO, and How Does it Differ from Other Payment Reforms?

In his paper “Creating Accountable Care Organizations: The Extended Hospital Medical Staff,” Dr. Fisher acknowledges that the term ACO “grew out of an exchange between he and Dr. Glenn Hackbarth at a MedPAC meeting in November of 2006”. (Fisher, 2006 n. 7). Dr. Fisher’s purpose in writing the aforementioned paper was to help identify the proper “locus for shared accountability” for a patient’s health care. HMO’s and other health insurers are obvious candidates, but as Dr. Fisher notes, HMOs only comprise a small percentage of the current market, and health plans in general have focused on negotiating favorable prices within relatively open networks of providers. (Fisher, 2006, p. 45).  The “medical home” (also referred to as a Patient Centered Medical Home or PCMH) is another candidate, but is taken out of the running by Dr. Fisher because of the untested nature of medical homes, and their requirement of new payment mechanisms. (Id.).

Dr. Fisher notes that a better option already exists: “virtual” organizations consisting of the various physicians that are associated with local acute care hospitals. As Dr. Fisher notes, these physicians are either directly affiliated with such hospitals through their inpatient work, or through the care patterns of the patients they serve.  Dr. Fisher refers to these multi-speciality group practices that are bunched around local hospitals as an “extended hospital medical staff.” He argues that improving quality and lowering cost should be realized by fostering greater accountability on the part of this “extended medical staff.”

In a recent Urban Institute paper on ACOs by Kelly Devers and Robert Berenson (pdf summary here, full pdf here), the authors point to three essential characteristics of ACOs:

  1. The ability to provide, and manage with patients, the continuum of care across different institutional settings, including at least ambulatory and inpatient hospital care and possibly post acute care;
  2. The capability of prospectively planning budgets and resource needs; and
  3. Sufficient size to support comprehensive, valid, and reliable performance measurement. (Berenson, p. 2.).

In exchange for investing in this reformed health care provider structure, the ACO members will  share in the savings that results from their cooperation and coordination. Thus, ACOs can–theoretically–act as a reform tool by incentivizing more efficient and effective care. This would help to combat the current perverse incentives of overutilization and overbuilding of health care facilities and technology.

In 2007, Dartmouth’s Institute for Health Policy and Clinical Practice headed by Dr. Fisher and Dr. James Weinstein, teamed up with the Brookings Institution’s Mark McClellan to create The Brookings-Dartmouth ACO Learning Network. The ACO Learning Network will serve as a support tool for providers looking to transition to the ACO framework. In the “Overview” section of their site (available as a pdf here), the Brookings-Dartmouth team provide a useful chart comparing the ACO model to other payment reform models such as “bundled payments,” “medical homes” and capitation. Click the image below to enlarge.

ACO Compared to Other Payment Reforms - Fisher 2009 - Click to Enlarge

ACO Compared to Other Payment Reforms - Fisher et al. 2009 - Click to Enlarge

Various Extant Structures Utilized

Since Dr. Fisher’s introduction of the ACO concept, the idea has continued to be refined. In their 2007 paper “Accountable Care Systems For Comprehensive Health,” Dr. Stephen Shortell and Dr. Lawrence Casalino envision a broad range of ACOs in addition to the “extended medical staff” originally described by Dr. Fisher. Drs. Shortell and Casalino identify extant organizational structures that could be leveraged to create ACOs, including the Multi-speciality Group Practice (MSGP), the Hospital Medical Staff Organization (HMSO), the Physician-Hospital Organization (PHO), the Interdependent Physician Organization (IPO), and the Health Plan Provider Organization or Network (HPPO/HPPN). (Shortell et al., 2007, p. 10). Below is a table from their paper that organizes the different ACO models while comparing their capabilities. Click the image below to Enlarge.

ACO Models - Shortell 2009 - Click to Enlarge

ACO Models - Shortell et al. 2009 - Click to Enlarge

ACOs In Practice

Building on the Physician Group Practice (PGP) demonstration project that rewarded the provision of quality care with a share of the savings, the Brookings-Dartmouth group propose a “voluntary and incremental” ACO program. (Fisher et al., 2009, p. 2).  The ACO would have to be a legal organization that can receive shared savings, and would have to incorporate primary care physicians who solely practice under the ACO. (Id.). Furthermore, the Brookings-Dartmouth group believes there would have to be at least 5,000 beneficiaries in the ACO for it to be viable. The ACO would provide CMS with a list of their providers willing to participate in the ACO. As discussed above, the beneficiaries would be determined by, among other things, the patterns of patient referrals in the region. However, beneficiaries would not be “locked in” to a given provider. (Fisher et al., 2009, p. 4). The ACO would receive savings if their risk-adjusted, per beneficiary spending levels were below their benchmark. Id.

An Ultra-Simplified Example

A hypothetical independent practice association (IPA) teams up with a community hospital to create an ACO. Medicare determines a benchmark, that is, what it will cost to treat the average beneficiary in that geographic area per year–let’s say $10,000. The physicians submit their traditional claims to Medicare under the RBRVS system while the hospital submits its typical DRG-base claim. Thus, the traditional fee-for-service system remains in place. At the end of the year, Medicare determines if the ACO has provided care for less than $10,000. If they have, the ACO is entitled to share in the cost savings, and the savings are divided among the providers and hospital. Though simple in theory, ACOs become more difficult when attempting to construct payment models that will distribute the savings of the ACO to the individual providers. Shortell provides another helpful chart that lays out some of the options; Click on the image to enlarge.

Payment Models - Shortell 2009 - Click to Enlarge

Payment Models - Shortell 2009 - Click to Enlarge

Criticism of the ACO Model

The strongest criticism that I am aware of is from Dr. Jeff Goldsmith PhD, president of Public Health Services at the University of Virginia. In his Health Affairs article entitled “The Accountable Care Organization: Not Ready for Prime Time,” Dr. Goldsmith recalls previous attempts to at implementing payment reform models based on shared risk:

The problem with this movie is that we’ve actually seen it before, and it was a colossal and expensive failure. During the 1990s, many hospitals and physicians believed that the Clinton health reforms would force them into capitated contracts with health plans. . . . Risk-bearing physician/hospital organizations and hospital-sponsored preferred provider organizations (PPOs) sprang up all over the country. . . . Some of these hospital/physician efforts actually succeeded and survive today. . . . However, these were outliers in an expensive failure.  Employers and patients preferred open panels managed by health insurers to closed panels managed by providers. Billions of dollars were lost.. . . Many of the practice acquisitions were reversed, as hospital systems sought to rein in their expenses and adjust to an open-panel world dominated by point-of-service style health plans

However, the 1990s left behind an expensive legacy:  highly concentrated local provider markets….There were numerous reasons for the 1990s collapse of at-risk hospital/physician partnerships, besides the failure to find willing buyers of their services. These efforts lacked infrastructure, experienced management, as well as reliable and timely cost information to support cost management. They assumed global risk but paid for care on a fee basis, just as Fisher and colleagues propose.  But these hospital-sponsored organizations could neither redistribute income nor exclude their high-cost providers (who inconveniently generate most hospital profits).

Some things have clearly changed in the ensuing decade. . . . A rapidly increasing percentage of physicians, particularly primary care physicians, are now hospital employees.  A larger percentage of the physician community receives hospital subsidies for call coverage. Many of these subsidies are, in fact, extorted from the hospital by specialists in scarce supply, destined to become scarcer.  An entire generation of 80-hour-a-week baby-boomer physicians are retiring and being replaced by younger physicians who want to work 30 hours a week.  You are not going to see a lot of these younger physicians in utilization review committee meetings after hours; they are going to be at their kids’ soccer practices.

What hasn’t changed is the fragmentation of care, the huge disparities in income and political power inside physician communities, and also the level of suspicion that physicians have of their now much more powerful local hospitals.  There is also, sadly, a thundering absence of collegiality – in my view, the central precondition of assuming risk and managing care. This absence is palpable in suburbs and even more pronounced in many “lifestyle dominated” resort communities in the sunbelt.. . .They are “collections” of physicians, not communities.

The hospitals in these areas appear formidable:  they have beautiful campuses,  prestigious boards, and deep financial reserves. . . . But these hospitals have been picked clean of vital outpatient services by their medical “communities.”

….Entire disciplines have disappeared from hospitals: ophthalmology, cosmetic surgery, gastroenterology, urology. Even community-based internists and family practitioners have stopped coming to the hospital; their patients are cared for by hospitalists who work full time inside the hospital.

The result of our previous attempts at ACO-like integrated care, Dr. Goldsmith points out, is that…

. . . .while the hospital has become more involved in subsidizing physician practice, physician communities have drawn away from the hospital and function increasingly independently on a day-to-day basis. Wennberg’s own data show that something like 40% of physicians no longer have any Medicare hospital-related fee income. So squashing hospitals and physicians back together into economic interdependence in a joint hospital/physician economic pool makes no real-world sense.

Dr. Goldsmith goes on to note that there have been some successful ACOs, but that they haven’t been “virtual” in the sense that Dr. Fisher points out, rather, they are

. . . real organizations with P+Ls, medical directors, and management infrastructure. Prominent examples in my home region include Carilion Health System in Roanoke and the Bon Secours Health System in Richmond. Voluntary ACO arrangements, with Medicare and with private insurers, may find enthusiastic partnerships with many of these hospital-sponsored physician groups. . . .

The Senate Bill

In defense of the Brookings-Dartmouth model, the group has gone on record in favor of voluntary ACOs. To Dr. Goldsmith’s relief, the Senate’s health reform plan incorporates ACOs on a voluntary pilot program basis. You can read their rebuttal to Dr. Goldsmith here.  Section 3022 of the Senate bill — which amends Title XVIII of the Social Security Act (42 U.S.C. 1395) — introduces ACOs under the name “Medicare Shared Savings Program. (View a pdf of the extracted ACO part of Senate bill here).

The Senate’s plan is remarkably similar to the Brookings-Dartmouth model. Under the Senate’s plan, ACOs will be eligible to receive a percentage of the cost savings that they have realized under the traditional fee-for-service Medicare system. The requirements are set forth in section (B)(2). Furthermore, the ACO shall enter into a 3 year agreement with HHS whereby the ACO must agree to contain at least 5,000 Medicare beneficiaries, while being prevented from engaging in risk selection. The ACO must define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth or other remote patient monitoring tools. The ACO must also demonstrate to HHS that it meets the yet-to-be defined criteria for “patient-centeredness”.

Whether ACOs will succeed is impossible to determine with certainty. The panopticon that would be ACO management looking over the shoulders of physicians may be enough to turn off many physicians. Nevertheless, as even Dr. Goldsmith acknowledges, some ACOs have thrived. Moreover, the voluntary ACOs in the Senate’s bill represent a measured approach towards reforming our system without a wholesale transformation. As Dr. Atul Gawande describes in a lesser-cited pre-“Cost Conundrum” article, the most sound approach is often “path-dependent,”  that is, it builds on what already exists. As Dr. Gawande notes:

. . .accepting the path-dependent nature of our health-care system—recognizing that we had better build on what we’ve got—doesn’t mean that we have to curtail our ambitions. The overarching goal of health-care reform is to establish a system that has three basic attributes. It should leave no one uncovered—medical debt must disappear as a cause of personal bankruptcy in America. It should no longer be an economic catastrophe for employers. And it should hold doctors, nurses, hospitals, drug and device companies, and insurers collectively responsible for making care better, safer, and less costly. . .

Whether the shared savings will entice physicians on a large scale is uncertain.  What is certain is that our current fragmented system incentivizes providers to offer neither cost-effective nor coordinated care. Though it is unlikely that physicians and hospitals will flock to ACOs from the start, the vision of ACOs conceived of by the Dartmouth-Group and described in the Senate bill may nevertheless prove itself a useful tool in a larger arsenal of approaches meant to salvage our unsustainable health care system. In other words, the Senate’s approach could provide a path-dependent solution toward the collective responsibility and better outcomes that Dr. Gawande mentions. And as described in the Senate bill, physicians and hospitals will not be offered a new path, but rather a resurfaced path that would retain fee-for-service, while providing a safer and smoother ride for the patient.

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  1. Ralph says:

    I think there are some nearly ACO models in existence in the US: Kaiser Permanente and Hawii Medical Service Association (HMSA). Both have top ratings for quality and patient satisfaction. The UK has the NHS which is strongly integrated (although smaller than Medicare) but very successful touting twice the quality and half the cost of US health care per person. There is no doubt a health care system that pays for care by the number of people covered as opposed to the number of procedures performed is a no-brainer which we need now. The money in the current system goes into a lot of pockets. The people with those pockets really do not want a more efficient system.

  2. Dr T says:

    Wild Willy get a clue. I am a physician and I can assure you that the amount adjusted off is not able to be deducted from taxes (difference between X and Y). Most commercial insurances force us into contracts that pay a percentage of medicare allowable. A common amount to set fees is 2.5 times medicare allowable. However most commercial insurances only pay 110 – 140% medicare and the rest is written off (but not tax deductible). I perform procedures in my office that are about 1/3 the cost of performing the procedure in the hospital. Yet medicare continues to cut my reimbursements (my most common procedure pays about 40% less than it did in 2003 when I started practice), eventually to the point where I will not be able to afford doing cases in my office. Tell me how it’s more cost effective to do the procedure in a more costly and inefficient environment – the hospital. By the way, I’m a solo provider in private practice with one physician’s assistant and I employ 20 people, many of which are needed for the inefficient billing system and authorizations needed to provide service. When you see the amount I’m paid, it’s before overhead, which is huge. You think a physician should be paid 50.00 for a physical? That wouldn’t come close to covering overhead.

  3. dr w says:

    We are already seeing the formation of ACO’s in AZ. Hospitals are busy buying up physician practices in an effort to create integrated provider networks.

    In 2013, there will be a single payment for surgery…. how does this work unless the anesthesiologist and surgeon both work for the hospital who presumably see the patient?

    Physicans should see the ACO for what it is…. a sellout by Obama to the hospital lobby.

    Instead of physicians being accountable to patients, we will now be accountable to a CEO of a for profit hospital..

    This is reality folks…. its happenning across the country.. watch your local market… hospitals make money on neurosurg and cardio … so these practices are purchased first followed by oncology and other procedural specialties.

    Control of the physicians which are the principle profit/loss centers for the hospital is central to this strategy.

    The critique of docs is that they are invcentivized to provide more care… is false.

    After a 60 hr work week, all I want to do is go home and see my family…. and I’m not going to do an unnecessary anything. It’s not worth $600 bucks minus collection costs minus taxes… with about $200 left… to spend a large part of my weekend away from family.

    Now… that $600 surgery is going to be worth around $15000 for the hospital… and if they are signing my paycheck…. what do you think is going to happen?

    Personally, I will take my ivy league education elsewhere

  4. WildWilly says:

    I’ve got two issues with this ACO thing.

    First issue
    So let’s say an ACO manages to care for me for a year for $9000 when $10000 was the established target. The ACO will be paid some portion of that $1000 of savings. Where is that money coming from? If it’s just some sort of rebate from the government, that’s not lowering the cost of medical care. The total expended, despite the alleged $1000 saving, is still nearly $10000. And I suspect that there will be no saving, in the end, because it will take some sort of government agency to monitor the savings, and that’s not free. No. If it cost only $9000 to take care of me, great. Everybody stand up & cheer. The $1000 saved should not be spent. Not paid. Not by anybody. Not to anybody. That’s the only way it will actually be a SAVING.

    Second issue
    How is it determined that my care for a year is supposed to be $10000 or whatever dollar amount is eventually decided? Who does that deciding? How? Seems to me that’s a process that won’t be free either.


    I see the problem as this. What we have seen in the past year or so has not been health care reform. It’s health INSURANCE reform. It has not addressed health CARE costs at all. There’s been no attempt to say, for example, no, you can’t charge $200 for an annual physical. It’s going to be only $50. Or better yet, some percentage of your annual income. There’s been no attempt to establish a grid of prices for services. Prices for things are completely arbitrary & set by the providers, with no attempt by any level of government to set these prices.

    There has been something of an attempt to impose prices on doctors by health insurance companies. If you look closely at your statements from the health insurance company, you see a lot of blather that says, more or less, this: Hey doctor. You billed X. We insurance company are going to pay only Y, which is less than X. And the difference X-Y? Well, sometimes there’s some agreement between the insurance & the doctor that the patient will not pay it, sometimes the patient has to pay it. In the case where the patient does not pay it, I’m thinking X was exorbitant to start with, Y was a reasonable payment, & the claim should have been Y to start with. But the doctor accumulates all his Y losses & claims them on his income taxes at the end of the year. Which is unethical in my opinion because the amounts Y are invented losses, not out of pocket real dollar losses. So not only are the medical costs too high but the doctors are getting away with paying less in taxes than they really should, thus aggravating the deficit.

    The medical system is the direct cause of stress in patients. It is shortening our lives. There really is no proper solution other than government-run medical care. That’s the only way there is a hope of actually setting rational price structures for services. Of course, that’s a false hope, too. Because ours is a nation of the lobby, by the lobby, for the lobby. Nothing is ever going to change. Things are just going to get forever more expensive. In fact, I’m not sure I understand why I’m even posting this comment. Oh well. I’ve said my piece. I hope somebody finds it worthwhile.

  5. Android says:

    Say you set the annual limit per patient at $10,000 and the ACO comes in at year end with costs of $9000- who in their right mind could expect the payer to maintain next year’s compensation at $10,000? No way, they will reduce it to $9000 and then ratchet you down every year.

  6. Cody says:

    The ACO model is similar to the model adopted in the Mass. commonwealth. One problem they have faced is the soaring costs from 133M in 2007 to over 880M in 2010. Like all entitlement programs once they are implemented they are hard to take away. The ACO also places the risk for patient behavior squarely on the shoulder of the Hospital and provider. Over 40% of hospital readmission rates are a the result of noncompliance or poor behaviors on the patient’s part are a cost that the ACO has to cover. The theory is the development of an elaborate system to continually monitor and observe patients to get better outcomes. This babysitter model is a monumental and costly task to institute in most communities. Currently hospitals are facing steep costs of the current push for EMR implementation. This has created a 6% to 10% higher cost per discharge in a hospital’s medical-surgical acute units, and it increased registered nurse hours per patient day by 15% to 26%. Despite being a Government mandate, there has been no corresponding increase in Medicare or Medicaid payment to defray these costs. Implementing a new, complex, technology driven system to monitor compliance and behaviors will be overwhelming. Additionally, the payment for the the ACO will be less than the payment would otherwise have been on a fee for service basis which is currently less than the cost of doing business for most hospitals and providers. Hospitals and provider strategies to survive will be to increase growth or decrease cost. One incentive for cost savings will be to eliminate services that are lower margin. If the bonus payment for a service is greater than the margin for that service the group will be inclined to not offer this to their patients. Indirectly a method or rationing care.

  7. D H Smaltz says:

    While I’m a proponent of market economics, free enterprise, etc., balancing the cost/quality/access theory of constraints has always been something few organizations have succeeded at in the eyes of their patients. Adding patients in a more significant way to the mix of accountability, may be a more pragmatic way out of this conundrum.

    When you try to get life insurance it is an accepted fact that if you are a smoker you will need to pay higher premiums. While there are a host of genetic related predispositions that I do not feel patients should bear the brunt of accountability, there are quite a few lifestyle related accountabilities that patients should be held accountable for (and pay higher premiums, co-pays, etc.) to help bridge the financial gap of the system as a whole.

    I’m absolutely against rationed care and cannot stand how little time I have with my doctors. It clearly feels like an assembly line when I’m with my doctor and it’s not her fault – the system made her that way – its the only way she can make a living. By more significantly asking patients that continue to ignore accountabilities that are within their control, to pay a disproportionate premium, we may be able to find a way to both bridge the financial gap of the system as a whole and also make Americans more healthy in the process. And hopefully give my doctor more time to really understand the condition that I’m there for that day.

  8. Frank D. says:

    Medical Home:

    In eight minutes, tell me your entire medical history. But leave out everything complicated.

    Okay, from now on, don’t tell me more than ONE fact or bring up more than one problem a visit. Oh, and it takes a month to get an appointment.

    That will be $200 please.

    My own doctors right now aren’t this bad. Not at all. But, the SYSTEM is making them into monsters, and neither they nor I are seeing a light at the end of the tunnel for America right now.

    Drink your Kool aid.

  9. Frank D. says:

    California’s capitation is BAD NEWS for patients. Basically, patients get extremely low quality care under capitation. People don’t hear about this because Calif’s laws “insure” that literally almost NO patients who are hurt or even killed can sue.

    Would you want every test your doctor gave you to come right out of your doctor’s pay? Thats what capitation is.

    Under capitation, it often seems like you are being led around in cirles by the nose. You never, ever get better, You get bills, but you never get well. Obvious things that you later realize should have gotten done don’t get done.

    Also, if you try to switch doctors, people who have any kind of illness often cannot find a doctor. Doctors don’t want them. Its a system from hell.

  10. Frank D. says:

    No US organizations are “accountable” anymore.

    None. They don’t care.

    They don’t have to.

    The US fell to #48 in the healthcare quality list last year. We are falling faster than any other nation.

  11. Frank D. says:

    Comparative effectiveness research assumes that patients have the right diagnosis. Unfortunately, policy mistakes like forcing doctors to see 30 patients in a day is preventing many patients from receiving an accurate diagnosis. Many diseases that are part of the medical picture in the rest of the developed world seem to have vanished here. Its not because people don’t get them, its because Americans get so little time with their doctors that its a hit or miss proposition if they get sick and the doctors first guess is not the right one.

    Our system is also geared heavily towards covering up its own mistakes. An intelligent doctor, I would hope, would welcome any information that could help them make a diagnosis. But often, that isn’t the case. They just don’t have the time to hear your story, even if your life depends on them doing so.

    Its not like that elsewhere.

  12. Jim La Rosa says:

    Good medical care is cost effective, but cost mitigation cannot fall on any one group’s shoulders. The cry, poignantly hidden and all too obvious, is for a “singularity of ethic” – placing responsibility on all providers and the patients too. As we view health care as a right, then those who partake in the care – from medical staff to big pharma to devise manufacturers – must embrace the ethic. This is hardly the case and the costs of simply-manufactured products exceed the cost of any similar non-medical device by hundreds-fold ! If an iPod were covered by insurance, its cost would be $10,000 or more !

  13. andy munner says:

    (In response to the “ultra-simplified example”)
    Lets say that the ACO intentionally mistrues its budgets, creating larger ones which will undoubtedly allow them to profit from the Medicare incentive…
    seems like a fundamental flaw to me.

  14. Red Fescue says:

    “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

    F.A. Hayek

  15. Leon from Redding CA says:

    Could someone help me out here regarding ACOs so I don’t have spend hours studying this hype? Isn’t this just HMO redux? I remember the discussion years ago that HMOs were going to control costs by making providers accountable but when the public caught on that their healthcare providers profited by withhold services the HMO idea blew up. Are we looking at the same thing regurgitated with a new name?

  16. The ACO model described here is doomed to fail for a few fundamental reasons. The first is the continuance of fee per service reimbursement, this means that costs are either going out of control, or a regulator is overseeing the care, possibly limiting necessary care to remain cost effective. The second issue is not locking in the consumer to a provider structure. This means the consumer may start treatment many times and never complete treatment as a result of simple personal preferences that they perceive to be unavailable at the current provider. These are behaviors that exists in many retail markets today, well studied, and have been consistent for years.

    The elimination of the Medical Home from the mix is a huge mistake, however and understandable one since the authors of the program are academically based, so their “Real World” perspective is likely not accurate. The Medical Home is the future of health care and developing without the need for a giant university study, insurance companies, or the government. It only requires the provider and consumer. That is why they did not include it.

    The system will work with standard business practices that create incentives for the same goal for all parties involved. When a consumer can identify a provider that will meet their needs, and the provider can identify their costs to establish a fair market price, and the payer and the consumer are the same person, then the goals are aligned, the outcome will be good. When the consumer cannot identify their solution, relies on a third party, which is concerned with limiting their costs because then they get paid a bonus, to identify this provider, and the provider makes more money by limiting services, then the outcome will be bad. The goals are not aligned, the consumer is not the payer so they have no influence, and the providers incentive is to spend as little time and effort as possible to meet the consumers needs…Is that really the plan we want?

    Dr. Fisher is close, he has just an infant thought right now. The market however has already created this model in a form that works called Direct Care, growing at an annual rate greater than 400%, the direct care model is the answer to every health care concern mentioned in this well stated summary of the ACO model.

    Daniel P. Francis, CEO
    EquityHealth LLC

  17. What a great resource!

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