Who should control ACOs, primary care doctors or hospitals?

The ACA is reducing the number of uninsured. But now we have to face the deeper problem of limiting the growth in health care cost, while improving its quality.

One of the principal idea for how to do this is the Accountable Care Organization (ACO). ACOs are groups of providers who contract with a payer (for example, Medicaid) to provide the care for a defined population for a capitated rate. The contract holds the providers in the ACO jointly accountable for achieving quality standards. The contract also targets a reduction in the rate of growth of health care costs, and it’s structured so that the ACO keeps a share of the savings if cost growth is under the target. Conversely, the ACO eats some of the excess cost if health care cost growth exceeds the targeted rate. In short, the ACO providers have a collective incentive to bend the cost curve down, while maintaining or improving the quality of care. The jury is still out on whether ACOs do reduce costs and improve quality. (For lots of TIE writing on ACOs, see here.)

Farzad Mostashari, Darshak Sanghavi, and Mark McClellan raise an important question about ACOs: Who are the providers who should run them? Do we want a hospital-based ACO, or one that is run by a network of primary care providers (PCPs)?

Many ACOs are founded by hospitals (including the US hospital that I work for). It’s easy to see why. Office-based physicians still largely work in small group practices and they have little experience in the organizational challenges of integrating diverse medical units and services. Starting an ACO requires capital and hospitals either have it already or know how to raise it.

However, Mostashari and colleagues argue for a PCP-run ACO, because they believe that PCPs have far reaching influence over health care costs. They also think that PCPs have stronger incentives to control costs. Hospitals are likely to be ambivalent about cutting costs, because they may need to keep their beds filled.

There may be an even more important reason to have PCPs run the ACOs. Americans hated managed care organizations (MCOs) when they tried to reduce costs. Patients perceived, often correctly, that the MCOs were making decisions without due consideration of a patient’s circumstances and against the wishes of her doctor. Moreover, the patient trusted her doctor and not the MCO.

Compared to the MCOs or a hospital, a PCP-run ACO may do a better job of keeping decision-making about care in the hands of the patient and her team of providers. PCPs are the providers who are supposed to stay with patients, to know them, and to take the lead in managing their care. If the ACO incentives for better and more cost-effective care are designed correctly, the PCPs’ interests will be more closely aligned with the patients’ interests than under fee-for-service medicine. A PCP-run ACO may be the organization best suited to bending the cost curve, while keeping patients’ trust.


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