Healthcare Reform Blog > November 2012 > ACOs: The Long and Winding Road from Volume to Value

ACOs: The Long and Winding Road from Volume to Value

Jenny Kerr

Contributor: Jenny Kerr
Topic: ACOs, hospitals, health plans, physicians

 At the Third National ACO Congress in Los Angeles last month, it was clear that all players in the three-legged stool of hospitals, health plans and physicians see ACOs as the future of reshaping healthcare cost and delivery. However, hospitals remain the biggest holdout in the evolution to population-based care that pays providers based on quality and outcomes instead of by service.

In fact, surveys of hospitals by consultant Ian Morrison presented at the conference indicated that few hospitals are enthusiastic about ACOs; only a tiny minority wants to do them. And that is because hospitals don’t want to change their revenue structure when they’re making money. The truth is that hospital CEOs are whispering about their best financial performance in years. They’re whispering, though, because a hospital making a bunch of money now is much like an insurance company making a lot of money: they will be accused of not being a good team player.

Physicians from across the country say they are ready and willing to form an ACO, but the hospitals in their markets are the obstruction. Executives from three of the largest insurance companies said ACOs, or a model like them, must survive, and insurers are ready to meet providers at whatever stage of the game they’re willing to start at. Some hospital systems are already on the bandwagon, clearing the trail for others as Medicare Pioneer ACOs or launching their own ACO with commercial insurers—all to start the transition away from fee-for-service. All parties seem to agree this is a necessity, but forcing others to change is a slow—and lengthy—process.

Insurers said that once they do enter discussions with providers about taking on risk and improving quality, providers immediately ask for a large rate increase—a tactic that runs counter to the point of lowering costs and improving quality. Hospitals have been successful at keeping their slice of the growing healthcare pie at 30 percent, despite shorter inpatient stays and improvements in technology. While all agreed that the road ahead is paved with ACOs, getting each entity—especially those that have long been positioned at opposite ends of the wrestling ring—to trust the other and agree to terms is difficult.

There are, however, some hopeful signs: The lesson from the successful CalPERS ACO in Sacramento is trust; Dignity Health, Hill Physicians and Blue Shield of California all opened their books, showed some vulnerability and talked about their business plans, and found they had more common ground than they thought. The agreement they ironed out, which was that all three could share in any savings after a global payment structure on top of fee-for-service was set up, has saved CalPERS $37 million in two years. Such trust is unusual but at the heart of where the speakers at the ACO Congress say we need to go to achieve affordable healthcare in the new reform paradigm.


Posted on: 11/27/2012 9:06:22 AM | with 0 comments


Tags: ACOs, health plans, hospitals, physicians

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