ACO Development: Provider as Driver

By John Nackel, PhD
03:50 PM

The proposed CMS regulations on Accountable Care Organizations (ACOs) took the first step in promoting discussions about lowering costs, but how to align these costs between each healthcare stakeholder is still an issue and obstacle, leaving most of us to wonder — how will this all actually work? Confusion around how to develop the legal and financial framework that is an ACO, coupled with the complexity of aligning each constituency and enabling the model to continue to work effectively long-term — which we define as a Sustainable Health Community — may be driven by the provider. For some, this new model will mean huge opportunity and for others, significant risk.

  • Providers (health systems, hospitals) may be the “center of gravity” — meaning they will drive contract negotiations with payers, covering everything from facility charges to physician salaries, so that they share the longer-term rewards of short-term decisions. These contracts will enable providers to gain financial stability, invest in technology and serve as the clinical epicenter of Sustainable Health Communities. Current ACO-like models are already finding ways to save money per member as a result of managing in a pay-for performance environment according to clinical best practices.
  • Physician groups won’t completely disappear — In some cases, where the physician model is strong — Mayo Clinic, Cleveland Clinic or Geisinger Health System — physician groups will drive negotiations with the payer and provider. If not allowed a seat at the table, they won’t be on board, and that will limit success of the model. To no one’s surprise, independent physicians will continue to be swallowed up no matter where they are, as they’ll be limited in their ability to contract individually and get referrals.
  • Specialty providers will be at risk — In an ACO model, centers of excellence are going to have work even harder to prove they can offer better outcomes at a lower cost than a generalist hospital. Children’s hospitals are an excellent example, where 50 percent of the patients treated could be managed equally well at a community hospital at half or a quarter of the cost. On the flip side, those providers that utilize specialty hospitals wisely — for example, Kaiser sending cancer patients to City of Hope — can save money by opening beds and improve outcomes by sending patients to specialized care facilities prepared to handle specific treatment needs.
  • State and provider-wide Health Information Exchanges (HIEs) will co-exist — Technology and the sharing of clinical data is obviously a critical piece of making any of this work. State-wide HIE will still be managed by the government, but physicians and health care leaders should ultimately have the most access and control over information directly impacting the care of their patients. As a result, providers will continue to invest in technologies that share information with a government-run system.

The clash between payers and providers over where the power of the ACO system lies is somewhat inevitable, but providers are already starting to prove that they will continue in a significant role to care delivery, guide the transition from fee-for-service to pay-for-performance, and ultimately align the system towards a Sustainable Health Community model.


John Nackel, Ph.D., is Chief Executive Officer at OptumInsight Consulting and Executive Vice President, OptumInsight (previously known as Ingenix). He has more than 30 years of experience advising health care organizations, entrepreneurs and emerging businesses. This post appeared at Healthcare Exchange.