Areas where all types of ACOs struggle include developing needed IT capabilities and reducing the use of low-value services.


Oct. 10—Accountable care organizations (ACOs) operated through commercial insurers are “considerably leaner” organizations than their Medicare and Medicaid counterparts, according to new research. However, all types of ACOs have far to go in critical areas, such as restructuring physician compensation and tracking financial performance.

Using data from national surveys of 399 ACOs, researchers from Harvard and other organizations compared 228 ACOs with commercial payers to 171 ACOs with only public contracts, such as with Medicare or Medicaid.

The study in Health Affairs found that commercial ACOs were significantly larger, more integrated with hospitals, and had lower benchmark expenditures and “significantly higher” quality scores. Commercial ACOs’ lower expenditure benchmarks per beneficiary coincided with their achieving smaller savings in the Medicare ACO programs.

Flexibility may be among the reasons for the better results of commercial ACOs.

“The drivers of higher efficiency in commercial ACOs may also be the result of a more mature engagement with private payers compared to noncommercial ACOs, which may have less flexible arrangements with public payers,” wrote David Peiris, PhD, a fellow in the Harvard School of Public Health, and coauthors.

But commercial ACOs also may have earlier experience with government-funded ACOs to partially thank for their better results.

Specifically, 75 percent of the commercial ACOs had Medicare or Medicaid contracts in addition to their private-payer contracts. Additionally, a larger proportion of commercial ACOs had previous experience with payment reform models and risk-based contracting.

Changing Models

Among the financial goals of ACOs is restructuring provider compensation to incentivize care quality over the quantity of care delivered. Commercial ACOs as a group had made more progress in this effort than their publicly funded counterparts, with 51 percent having changed their physician compensation models since becoming an ACO. Only 28 percent of noncommercial ACOs had done so.

However, such compensation changes in isolation may not have much impact because fewer than half of all the ACOs in the study were monitoring or reporting financial performance at the clinician level.

“Drawing on institutional theory, it seems that ACOs to date have minimally disrupted the status quo in provider compensation reform,” Peiris and colleagues wrote. “Furthermore, a low proportion of ACOs reported having strong financial or quality monitoring systems. Thus, having the correct size and type of incentives is not enough: The lack of an adequate infrastructure to implement these incentives remains a major barrier.”

Those findings on fee-for-service (FFS) compensation echoed a survey of 68 commercial and noncommercial ACOs released in January by Premier. That survey found few ACOs had phased out FFS, with capitation used by 18 percent and bundled payment by 15 percent.

Based on a model created by the authors of the Health Affairs study, commercial ACOs had higher scores for quality activities.

Specifically, 79 percent of commercial ACOs had taken action to improve efficiency in care processes, compared with 73 percent of noncommercial ACOs. Similarly, 78 percent of commercial ACOs had taken steps to reduce unnecessary hospitalizations, compared with 67 percent of noncommercial ACOs; and 59 percent had moved to address specialist referral processes, compared with 44 percent of noncommercial ACOs.

A larger share of commercial ACOs also were investing in processes to reduce the use of emergency departments for unnecessary care, as identified by the Choosing Wisely campaign.

Areas where the authors saw the need for more action by all types of ACOs included reducing the use of other low-value services, such as outpatient visits, imaging, and post-acute care.

Another area where all types of ACOs continued to struggle was overall electronic health record (EHR) capacity. Only 31 percent of commercial ACOs and 15 percent of noncommercial ACOs used a single EHR system. Regarding meaningful use, 75 percent of an ACO’s primary care clinicians met the criteria in 26 percent of commercial ACOs and 33 percent of noncommercial ACOs.

“Although EHR adoption, the use of decision support and data analytics, and sharing of information between providers are all considered essential building blocks to delivery system reform, only a minority of ACOs (both commercial and noncommercial) said that they had a high level of capability in these areas,” the study authors wrote.

The patient recordkeeping findings echoed the results of a January survey of 100 ACOs, which found less than one-third operated a single EHR system, while 59 percent used multiple systems and 23 percent used paper charts. 

Early Stages

The authors’ conclusion that ACOs are slow to implement care-quality protocols, such as performance monitoring and quality improvement processes, echoed the recent assessments of other ACO observers.

 “We’re not very good at this yet; there are a lot of people who are not ready for it, and the timing is a critical issue,” Mike Leavitt, chairman of Leavitt Partners, said at a recent congressional briefing.

Alternative models to fee for service compensate providers who oversee the care of about 28.3 million patients, according to Leavitt Partners calculations. But that figure shows adoption of such payment structures still has far to go.

Kevin Klobucar, an executive vice president for BCBS Michigan, said at a recent HHS event for insurers that one thing his company took from its experience with ACOs was how far many providers have to go to be ready to participate in such models.

“We need to find provider partners willing and able to do this,” Klobucar said. “Sometimes we need to say, ‘You’re not ready to do this.’”

Bob Kocher, a former special assistant on health care to President Barack Obama, cited earlier data from Medicare ACOs to conclude that most of the savings to date has come from reduced hospital services.

“So, it’s not surprising when a hospital runs an ACO, they have angst; they’re not sure what they want to do because they lose revenue today to maybe get it back in shared savings, but they share it with a payer,” Kocher said at a recent congressional briefing.

Kocher urged changes to ACOs to emphasize two-sided risk models, which are necessary to create enough incentive to “redesign your system of care, completely.”

However, such models could cost primary care practices much more than they earn from Medicare patients. So new ways are needed to cap their losses, Kocher said.

Kocher echoed many ACO advocates in urging changes to the benchmark structure of the Medicare ACO program to keep successful providers from having to overcome an ever-lower spending benchmark as they improve the cost-effectiveness of their care.

The latest Medicare ACO results illustrated that concern. An analysis by Ashish Jha, MD, a Harvard health policy researcher, concluded that per capita benchmarks for the ACOs that garnered savings were $10,580 and their actual spending was $10,140. Meanwhile, ACOs that didn’t garner savings had average benchmarks of $9,601 and actual spending of $9,901.

“We should think about adjusting to the market average or some other benchmark after the first go-around,” Kocher said.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Monday, October 10, 2016