Dean CoddingtonIn a new book, Political Malpractice, Stan Hupfeld, the former CEO of Integris Health System in Oklahoma City, refers to accountable care organizations (ACOs) as being similar to the discredited HMOs of the 1980s and early 1990s. A former CEO friend, who sent me Stan’s excellent book, noted that he often hears ACOs referred to as “a wolf in sheep’s clothing.” He was surprised when I said I thought they were quite different.

We heard similar comments when the concept of an ACO was first introduced four or five years ago. For example, one of our partners said she could not see the difference between the old-fashioned primary care gatekeeper of the early HMOs and the patient-centered medical home. We see them as quite different.

In recent presentations on ACOs, we have used the following chart to show the major differences between ACOs and tightly managed care, which usually means HMOs.


ACOs and Managed Care: Major Differences   
ACOs Managed Care (HMOs)
1. Patient-centered medical home 1. Gatekeeper
2. Retrospective review 2. Prospective review
3. Risk-adjusted payment based on performance 3. Capitated payment with no risk adjustment
4. Focus on patients with chronic diseases 4. Focus on population as a whole
5. General availability of electronic health record 5. Paper medical records


For me, the ACO focus on those with chronic disease (#4) is a key difference. The HMO approach did not normally differentiate among subscribers; it treated a 27-year old indestructible male the same as a 59-year-old female with chronic obstructive pulmonary disease (COPD). As we know, the big dollars to be saved in health care are in doing a better job of managing the health care of patients with chronic illnesses, such as diabetes, COPD, or congestive heart failure.

On #3, the CEO of a primary care network that also accepts financial risk for specialty care told us that without risk adjustments in the Medicare population of the Medicare Advantage product, it would be impossible to make money on capitated payment. “With risk adjustment, we love taking care of older, sicker patients.” Risk adjustment was not part of most early HMOs.

Here are two questions for your consideration:

  • How would you describe the differences between HMOs and the new ACOs? Or do you think they have more similarities than differences?
  • Do the differences bode well for the future of ACOs?

Dean C. Coddington is a senior consultant, McManis Consulting, Denver, and a member of HFMA’s Colorado Chapter.

Publication Date: Thursday, April 04, 2013