A Fork in the Road: ACOs vs. Direct Practice?

by Gregg A. Masters, MPH

If you come to a fork in the road, take it.

In the run up to the passage of the Affordable Care Act (select milestones here), the Senate Finance Committee under the leadership of Chairman Max Baucus presided over a comical volume of amendments proffered by his colleagues on the other side of the isle, see: ‘Senate Democrats Lead Historic Passage of the Patient Protection and Affordable Care Act‘.

Senate Finance CommitteeHaving witnessed gavel-to-gavel coverage of this painful historical consideration (some may say exquisite political theater) I soon began to refer to this bunch as the ‘dis-ingenuous five‘ (Hatch, Grassley, Cronyn, et al) as all of their amendments had one thing in common – to dilute if not distract from the intent of the Act or any of its targeted provisions.

Fast forward some 5+ years and the ideological drama of a very complex piece of legislation still engenders varying degrees confusion, implementation complexity, litigiousness and its share of opposition often nested inside simplistic and dumber by the dozens sound-byte alternatives, witness this recent exchange between former Senator and Governor Judd Gregg and the journalist Chris Hayes.

Yet, forged from private market competitive ‘lessons learned’ experience, supported by tomes of sound bi-partisan health policy reasoning and enabling regulatory consideration two seemingly opposing remedies co-exist with relative degrees of market uptake success: ACOs and ‘DPCs‘ (direct practice‘) including it’s retainer and membership model medicine derivatives.

Some say direct primary care (DPC), still a trickle in terms of share of medical practice participation, is the way to ‘give the finger’ to the prevailing mangled care amended bill and chase model of American medicine (and by proxy the ACA) and exit the system in favor of a more simplified and patient centric model. Yet there is more to this story as few get the provisions in the ACA enabling the inclusion of DPC’s as potentially ‘qualified health plans‘ and thus eligible for listing on State or Federally Facilitated Health Insurance Exchanges, see: ‘DPC and Insurance, HDHP, HSAs‘; not to mention there are a range including ‘hybrid’ DPC models (from Qliance to OneMedical and many in between) that stay tethered to a claims filing and collections model of operations.ACO's: what's next if we fail? Jay Crosson, MD | 3rd National ACO Congress

ACOs are a statutory construction of the ACA via introduction of Section 3022: The Medicare Shared Savings Program and center core to the impact and efficacy of the law’s intent. To many this rules ACOs out as de-facto agents of change driving transformation of an excessively complex, silo-ed and provider centric healthcare financing and delivery system quagmire.

Another Way To Look At It

So for those willing to dive a little deeper into the chassis of both business models and services line extensions there may be more similarity between these two seemingly oppositional vehicles.

Both are variably tethered to the ACA and thus part of the implementation vision of the President and his then allies in the Congress. At its core the DPC model is a return to HMO roots of ‘pre-paid’ comprehensive primary care services though the DPC model is not in the business of health insurance while HMOs clearly are. While DPCs typically only include the range of primary care services they control, and exclude specialist referrals, lab and imaging services and hospital inpatient or outpatient services, they do leverage principles of ‘re-insurance’ via optional wrap around high deductible or catastrophic plans.

ACOs in the Medicare Shared Savings Program (MSSP) are seen by many especially those risk savvy medical group or integrated delivery system operators of Medicare Advantage health plans (aka ‘HMOs’) as too little too late (or ‘HMO-lite’) versions of the real deal and unlikely to steward the meaningful transformation from a volume-to-value based healthcare economy.Standing Up the ACO

Yet, the truth is they’re both part of the broad brush of initiatives included under the tenets and principles that gave birth to the ACA, see: ‘Obama-care 101: The president’s 8 principles‘.

Clearly this transformation of 1/5 of the U.S.economy will take time and there are many moving parts. The question is do we have enough time for pluralistic remedies to take hold before the ‘system’ collapses on itself? The nightmare scenario being non-risk bearing ACOs can’t deliver the shift to value and DPC led ‘exits’ create a perfect storm of declining supply at the precise time of peak demand for primary care services.

So one more time as I often say here: ‘…we shall see?’



Join the Conversation


  1. For me (a DPC doc who was previously part of a primary care group building an ACO), the DPC movement is not just a harkening back to HMO capitated payments. The biggest differences are, in my view, cost transparency and patient payment. Patients being involved in the payment process (rather than a 3rd party payor) is a huge cost-controlling measure for both patients and for the doctors ordering tests and prescribing medications. Suddenly the idea of value becomes important in a world where it has nearly entirely lost its meaning. ACO’s on the other hand, are more complexity obfuscating cost. There is absolutely no way to answer the question “how much does this cost?” in an ACO setting. So there are no perception of value and no resultant control of cost. This is why the DPC movement, as long as it stays independent and is not seduced into a third-party relationship, has such power to transform. Suddenly the concept of getting the most value out of care becomes paramount. Patients want me to justify the cost of medications I prescribe and tests I order. That is incredibly different from the current structure.

    1. Thanks Rob. Totally trust your gut and experience here. My offer is think about and view ‘HMO’ pre-Wall Street roll-up when they were rooted in the communities they served as non-profit community constructs. Yes, many could tell you the cost of XYZ cuz they negotiated these services on your behalf. Forget service tiered hospital per diems, they operated in the world of global per diems. Ergo give me a condition and Dx, I add expected LOS and voila I have an estimated cost basis of your ‘stay’.

      The fork in the HMO road came when HMOs lost their way and became just another quarterly earnings per share play on analysts call. Used to be ‘ROI’ from a community based HMO was giveback to the community in terms of better health outcomes for dollars spent (better experience of care, better outcomes at lower per capita costs aka ‘the triple aim’). Seems to me this is the end game for the DPC world as well as any other ‘play’ that offers a value proposition to consumers, payors or providers for that matter.

      Just thinking out load here…. but hope this makes sense to you.

      And thanks for your comment. Loved your recent “what went wrong” (http://thehealthcareblog.com/blog/2015/06/14/what-went-wrong/ ) post on THCB, BTW.

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