That’s Not an ACO!

By Gregg A. Masters, MPH

One of the last ‘super PHOs’ standing circa the blood bath, grand ‘risk push-back’ and subsequent unwinding of many physician/hospital JVs of the 90s, Advocate Health Partners (aka @AdvocateHealth) and it’s aligned payor partner, Blue Cross and Blue Shield of Illinois (aka @BCBSIL) went public with their commercial ACO results last week. For complete announcement, click here.

The net takeaway can be summarized as follows:

[though limited to 6 months of data] results thus far are inconclusive but are encouraging

Advocate Health Care is by anyone’s definition a mature integrated delivery system emerging from the independent physician community space though tethered to an institutional partner, vs. the retooling of a closed system to more effectively integrate with the private medical community, i.e., Kaiser, Mayo et al.

The piece, though clearly hedging a ‘good news and bad news’ message, none-the-less settles on the upside of proactive collaboration by the provider community with their local market payor partner.

Yet, what I find of particular interest and worthy of further consideration is the comment proffered by author, lecturer and seasoned veteran in the HMO, and managed competition space, William DeMarco as follows:

This is not an Accountable Care Organization as the shared savings formula and results of quality improvement are put on the back burner in favor of replacing revenue lost in inpatient care. Bundled payment BY ITSELF will not improve care or make providers remove waste from the system, rather providers will merely try and recover what they were loosing by delivering preventable and avoidable care.

So what do you think? Is Bill being too hard on Advocate et al? Or might we be best advised to let ‘innovation’ manifest granularly by local communities of practice vs. against the rules as codified by CMS in the Affordable Care Act & sequelæ?


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  1. Bill is right on the mark. These types of provider and insurer collaboration can be helpful, but they are primarily contracting efforts where the focus is revenue enhancement for both parties. I would be interested in weather the end user, e.g., employer and members, are experiencing any substantive savings and increased quality that can be quantified. That is where the rubber meets the road.

    1. Hi Jack, thanks for the comment…

      Agree! The ‘in the middle’ stage we find ourselves transitioning from volume to value and eventually population health will be a challenging period to navigate. Contractual efforts may be one way of enabling the new paradigm, but obviously the ‘devil is in the details’. Rhetorical argument, as well as the well founded operational objections from the provider community notwithstanding, we still have our backs against the wall!

  2. Jack
    Thanks for your comments and yes the ACO is very much misunderstood. There are a lot of private bundling experiments going on and doctors are being told these bundled payment programs are private ACOs but that is a mistake.
    There are four types of Medicare shared savings programs and they are a) Pioneer, b) Advanced payment c) ACO track 1 no downside risk, d) ACO track 2 upside and downside risk. All of these types of programs will eventually converge on some sort of sophisticated risk-adjusted payment plan that will likely including bundling but only after the organizational design, reimbursement changes and clinical re-engineering all are aligned to produce predictable outcomes built around prospective payment.
    To miss this opportunity by jumping to bundled payment day one will create just the kind of non- aligned incentives as we see between insurers and providers now. The article discussed says at the end the hospital will need to take back all the losses from reduced length of stay and reduced utilization as costs in the bundled payment ACO. What that means is after the hospital gets its replacement of wasted services paid for the docs get the remainder. So as physician compensation subsidizes further annual losses, and they will only rise not fall, the physician will bear the brunt of this by subsidizing these excess costs out of their own bonus when they should be given a greater percentage for doing the job of reducing excessive admissions and length of stay. This re-engineering is the only way to get to the triple aim which is the framework and frankly the business imperative for changing the business model of care delivery sought after in the ACA.
    So there are MSSP and Private shared savings plans that we refer to as Accountable health organizations ( Enthoven 1975). AHOs are private ACOs that do the 5 things I mention above in order to change the business model for health care for private payers buy building a high performance panel that align the pay and performance in such a way that improved outcomes means more payment with less expense.
    Bundled payment alone puts more money but also could represent more expensive outcomes unless there is the infrastructure to hold it altogether and be accountable not just conduct business as usual and hope some-how that with more money on the table there will be money left over after the dust clears.
    Bundling has challenges but even in a private ACO one must have real accountability that can be measured and replicated and reported as a superior outcome otherwise it’s just a different name for capitation

    1. Thanks Bill! A very thoughtful and instructive comment. ‘Un-bundling accountable care’ or entities in service of the broader ‘triple aim’ mission is an interesting exercise. Yet any external influence that drives (incentivizes) consolidation to rationalize and promote equity in the fair valuation of medical services is a worthwhile process no?

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