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‘Accountable’ Care Organizations?

Health Letter, May 2014

By Sidney M. Wolfe, M.D.

There are now well over 5 million Medicare patients, tens of thousands of physicians and hundreds of hospitals participating in the more than 350 Medicare Accountable Care Organizations (ACOs) created as part of the Affordable Care Act (ACA).[1] So why do so few patients know about them? Perhaps because they are too good to be true and not really as accountable as they seem.

The website of the Centers for Medicare and Medicaid Services (CMS) indirectly provides some rosy answers to this question. With the implicit concept that all patients would obviously love to be taken care of in an ACO, CMS’ description begins:

“Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients.

“The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.

“When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.”[2] [Emphasis in original]

The first paragraph refers to the voluntary coming together of doctors, other providers and hospitals. Patients are not mentioned because ACO participation for them is not voluntary and there is no formal, automatic process for notifying them. Medicare involuntarily assigns patients to ACOs and does not inform them in advance of the new payment arrangements. Another Medicare website states than such notification might involve “a letter, written information provided to you when you see your doctor, a sign posted in a hospital, or it might be a conversation with your doctor the next time you go to see him or her.” [3] [Emphasis added]

The second paragraph conjures an image of pie-in-the-sky care. Who would not crave this kind of system?

The third paragraph is a little misleading. In the event an ACO generates a surplus, whether by “spending health care dollars more wisely” or other means, the sharing of the money is between the ACO and Medicare, not with patients.

A closer look at ACOs

The theory whereby ACOs are supposed to work is similar to the theory behind Medicare health maintenance organizations (HMOs) and several other Medicare payment policies. It includes reference to a triple goal: to contain cost growth, improve clinical quality and patient experience, and improve overall population health.

Are there data supporting the reality of ACOs achieving these three goals? No, but many politicians and policy wonks remain optimistic. However, a recent article  in the journal Health Services Research on ACOs by Stephen Shortell — dean emeritus of the School of Public Health, University of California, Berkeley — and others stated that “the relevant question is not whether the ACO cup is half full or half empty. Rather, the relevant question is whether the water level is rising or falling”— that is, whether ACOs are achieving their goals.[4]

Another recent article, by health services researcher Rachael Addicott and Shortell, was intriguingly titled, “How ‘Accountable’ Are Accountable Care Organizations?” The answer to this question is crucial because, in the context of our seriously malfunctioning health care system, the unlikely probability of ACOs achieving their three goals will be further lessened if there is a deficiency in accountability.

The authors tried to answer the title question by taking an intensive look at four ACOs across the United States. Their examination included 34 semi-structured interviews with ACO administrative and clinical leaders; observation of nine meetings, including ACO board meetings, strategic planning meetings and operational committees; and a review of documents from each ACO.[5]

The authors stated that “there is understandable skepticism whether the collaborative accountability espoused through ACOs will have a positive impact on either cost or quality,” even though the ACO model assumes that those involved in governance and accountability work together toward the shared aims of improving quality and containing costs.

Addicott and Shortell’s skepticism arises from the uncertainty as to “whether physicians and others involved in health care payment and delivery are ready and willing to collaborate and be held to account in this manner.”

Among their findings were the following:

  • Little evidence exists of real patient involvement in either governance or accountability mechanisms, aside from traditional patient satisfaction surveys.
  • The primary method of holding ACO physicians accountable was through a pay-for-performance program, which involves paying bonuses for hitting specific performance targets.
  • There were very few examples of physicians being held accountable collectively and, therefore, only limited evidence that the new payment arrangements foster collaboration.
  • ACOs invested more in financial and procedural accountability, leaving little direct consideration for quality or outcomes. “Although the ACO model places greater emphasis on both reducing cost and increasing quality of care, most of the focus was on financial and procedural accountability—with limited direct consideration of quality or [patient] outcomes.” [Emphasis added]

Others also have raised concerns

In a cautionary reply to a new medical society report embracing ACOs and bundled payment – two key reforms embedded in the Affordable Care Act –  Drs. Steffie Woolhandler and David Himmelstein, co-founders of Physicians for a National Health Program, liken ACOs to HMOs and charge that history is about to repeat itself, to the detriment of both patients and physicians.

Commenting about an article they published in the Journal of General Internal Medicine, Himmelstein and Woolhandler say both physicians and patients have bad memories of HMOs which proliferated in the late 1970s and early 1980s: “HMOs were associated with frequent denials of care, restrictive networks of providers, and increased financial “risk-sharing.”[6]

The article states that such HMO practices, which are resurfacing in the context of today’s ACOs, had the effect of limiting patient choice and pressuring physicians to withhold care and avoid unprofitably ill patients, such as those with mental illnesses.[7]

The payment reforms of that period, including bundled payment and capitation, amounted to a scheme of “fee-for-NON-service,” they say. The cumulative effect of all these changes was to swell the profits of the privately owned HMOs.

The HMO model, touted as a cost-saving strategy (as are today’s ACOs), was sometimes associated with flagrant abuses, including “horrifying tales of office celebrations triggered when reviewers discovered loopholes allowing the denial of transplants.”

Moreover, just like HMOs, ACOs will be highly susceptible to “gaming,” e.g. overdiagnosing and “upcoding” of medical conditions to make patients look sicker on paper so as to garner higher payments for care. Experience has shown that providers who initially refrain from such practices are ultimately forced to do so in order to compete and survive, they write.

Nor is there evidence that the gamut of cost-saving mechanisms championed by today’s ACO advocates, including pay-for-performance schemes, will save money.

Himmelstein and Woolhandler note that giant corporations will have a competitive edge in the reshaped, post-ACA health care landscape, based on their clout and the size of their market share, and that “a system dominated by profit-maximizing oligopolies is a perilous route to savings.”

In contrast, countries that have adopted a universal system of care with regulations that restrain costs and minimize opportunities for profit have achieved better outcomes, lower costs and fairer compensation of physicians.

“Payment reform should focus not on manipulating greed but on dampening it,” they write.

We agree. Too much that is called health care reform really manipulates greed for the benefit of insurers, drug companies, hospitals or doctors. Is it really only to these entities that ACOs should be accountable? What about patients?


[1] Department of Health and Human Services. More partnerships between doctors and hospitals strengthen coordinated care for Medicare beneficiaries. http://www.hhs.gov/news/press/2013pres/12/20131223a.html. Posted December 23, 2013.

[2] Centers for Medicare and Medicaid Services. Accountable Care Organizations (ACO). http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ACO/. Updated March 22, 2013.

[3] Centers for Medicare and Medicaid Services. Accountable Care Organizations & You: Frequently Asked Questions (FAQs) for People with Medicare. https://www.medicare.gov/Pubs/pdf/11588.pdf. February 2014.

[4] Shortell SM1, McClellan SR, Ramsay PP, Casalino LP, Ryan AM, Copeland KR. Physician Practice Participation in Accountable Care Organizations: The Emergence of the Unicorn. Health Serv Res. March 15, 2014. doi: 10.1111/1475-6773.12167.

[5] Addicott R, Shortell SM. How “accountable” are accountable care organizations? Health Care Manage Rev. Jan. 2, 2014.

[6] Physicians for a National Health Program. ‘Accountable care’ model revives HMO strategy, boding ill for patients, physicians: JGIM article. http://www.pnhp.org/news/2014/january/%E2%80%98accountable-care%E2%80%99-model-revives-hmo-strategy-boding-ill-for-patients-physicians-j. Posted Jan. 7, 2014.

[7]Himmelstein DU, Woolhandler S. Global Amnesia: Embracing Fee-For-Non-Service-Again. J Gen Intern Med. Jan. 7, 2014.