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ACOs' Real Test Will Come with Two-Sided Risk

Philip Betbeze, for HealthLeaders Media, July 13, 2012

Of the 89 who were approved, only five took risk on both sides of the equation. That means 84 of the groups will face no risk of loss through the ACO demonstration. Let that sink in for a moment. They can benefit from any cost savings they achieve over traditional fee-for-service reimbursement, but they can't lose. In short, for providers, what's not to like? The majority of these ACOs are physician-oriented organizations, and much of the savings they are expected to generate for CMS will come from decreased hospital utilization. Therefore, most of these organizations won't be goring their own oxen.

The five that chose to accept risk of losses are taking on true risk, but the others are not. They're smart not to do so.

Here's why, according to a sentence buried in a release from CMS: "Because the Shared Savings Program is part of the original Medicare fee-for-service program, beneficiaries served by these ACOs will continue to have free choice about the care they receive and from whom they seek care, without regard to whether a particular provider or supplier is participating in an ACO."

That's the rub. You can hope patients will seek all their care from your ACO, but you can't make them, and therefore you have little control over the costs they will incur for their care.

CMS says this and other Medicare Shared Savings programs (including the 32 organizations in Pioneer ACO program and the six Physician Group Practice Transition Demonstrations) could save up to $940 million over four years.

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1 comments on "ACOs' Real Test Will Come with Two-Sided Risk"


Arun K. Potdar, MA-Health Care Mgmt. (7/15/2012 at 11:17 AM)
Philip Betbeze has accurately dignosed the problems ACOs will encounter. Looking at the premise upon which the ACO concept was designed reminds me of bygone days of Staff Model Group Health Plan. When I joined the plan in late eighties it had 165,000 members. In two years it went under with migration of members to Mid Atlantic PPO plan. Controlling patients' choice to a fixed group of care givers had failed miserably. There are two factors responsible for this. First, Physicians by training personality are loners and rarely work together as a team unless it is major project that would bring everyone a Nobel Prize. Second, the leadership in Case Management will be the weakest link in the chain. Ask any senior manager about it if they had worked in a large group practice. It is not clear how the savings will be shared and that again like formulae for profit sharing of a group practice, will have frictions. Patients themselves are driven by outcomes and bedside manners. Any one disappointing member or factor will take them out of ACO. As correctly pointed out in this article; without the risks ACO will have "nothing to lose" attitude. Unless a major paradigm shift in which existing culture of individualistic physician services without sharing, is replaced by a cooperative and team working and coordinating mindsets, ACOs will not give desired savings and will fall apart like the Staff Model HMOs of the past.