Question

what are some benifit and disadvantages of ACO that will impact intergrated healthcare delivery system

Answer 1

Benifits of ACO

Evidence to date points to both the potential of ACOs to slow spending and improve quality, but also the significant obstacles that they face. One of the encouraging lessons so far is that quality of care need not be threatened by a contract that rewards savings, provided that meaningful incentives for quality are in place. In both public and private two-sided contracts, process quality seemed to consistently improve. However, less is known about performance on outcome measures, which is ultimately the meaningful metric for patients.

Broadly speaking, ACO contracts may be able to induce changes in physician behavior that could lead to medical savings. The low hanging fruit in Medicare seems to be admissions and readmissions, while that in commercial contracts may be lower prices obtained by changing referral patterns. While these medical savings reveal changes in clinical decision-making, it is still poorly understood whether clinical choices geared towards higher value can extend to other areas of utilization where wasteful care may be concentrated. Little is also known about whether an ACO’s physicians and hospitals are in agreement over these changes in utilization or referral patterns, given their consequences for referral business and admissions. Moreover, there has yet to be evidence suggesting that medical savings can be larger than non-claims payments (rewards and bonuses to the ACOs) in a given year, generating net savings to the health care system. This may well take time to materialize given the initial investment costs and inducements for provider participation embedded in the early year incentives, but it is an important metric of success.

ACOs serve as a vehicle for payment reform and organizational reform among providers. They bring physicians across specialties and hospitals together under the same contractual roof, allowing the organization to determine how it allocates its resources under the spending target. Historically, policies aimed to slow health care spending have focused on either cutting prices (provider fees) or constraining volume (gatekeeping, prior authorization, and utilization review, etc.), but both types of strategies have been complicated by unintended consequences. Medicare fee cuts have traditionally been followed by compensatory increases in the volume or intensity of coding, offsetting the intended savings to a significant degree.34,35,36,37 Managed care techniques have met resistance from both physicians and patients.38,39 A spending target or budget takes an alternative approach; rather than controlling prices or quantities directly, it seeks to control total spending. Although the underlying fee schedule is retained for accounting, a spending target or especially a global budget pushes the organization to decide what care is high or low value.

A two-sided contract imposes stronger incentives on the ACO than a one-sided contract, which is both a strength and a weakness. While ACOs facing downside risk may respond earlier to the incentives, as some of the evidence thus far suggests, this risk may also propel ACOs to abandon this contracting model. In the Medicare Pioneer ACO program, for example, nine of the 32 organizations exited the contract after year 1, which was allowed given the voluntary nature of participation. Seven organizations opted for the one-sided Medicare Shared Savings Program in year 2 and two left the ACO programs altogether. Downside risk was thought to be a principal concern for these organizations.40 Massachusetts providers in the AQC have thus far remained in the contract, but the AQC was a multi-year agreement to begin with.

Spillovers are another potential strength of the ACO model. Given that organizations care for patients across multiple payers, strong payment incentives in one payer population may affect care broadly. In the AQC, for example, recent evidence showed slowing of spending in Medicare beneficiaries associated with the contract in similar settings and categories of care as for the Blue Cross Blue Shield patients.

Disadvantages of ACO

Still in its nascent stages, the ACO paradigm faces a number of challenges. Some relate to inherent weaknesses of the model, while others relate to the institutions and economics of the broader health care economy. At a contractual level, a key challenge is setting the target growth rate. If too low, providers may be overly constrained; if too high, providers may not have enough incentive to change practice. In an extreme case, if the target is set above what spending would have been under the old arrangement, an ACO contract can in fact be cost increasing on claims spending alone. Financial rewards such as shared savings and quality bonuses can help offset the risk, but they also make it more difficult for the ACO contract to generate net savings.

Achieving the right balance of risks and rewards is difficult. As noted above, a one-sided contract may not be strong enough to induce behavior change,42,43 but a two-sided contract may be too risky, driving providers who are unable to align incentives and coordinate care to exit the model.44 Although the percent of shared risk borne by payer versus provider can be negotiated, putting financial risk on providers in a palatable way will be a key challenge. Financial risk can be more daunting if ACOs do not know in advance which patients they are responsible for, as in contracts with retrospective attribution rules and enrollees in unmanaged plans. A payer can help providers handle risk by sharing data on spending and identifying potential areas of overuse and low value care. Payers can help further by implementing risk corridors, providing reinsurance, or improving risk adjustment of the organization’s global budget. But with all that said, it remains to be seen whether providers around the country will be willing to bear substantive risk.

Within the ACO, a primary challenge is diving up risks and rewards among constituent providers. How much shared savings are given to the hospital, to primary care physicians, or to specialists? What share should each specialty receive? What about shared losses should spending exceed the target? In a two-sided ACO contract, these questions are particularly salient as global budgets change the business model for providers. Revenue centers under fee-for-service become cost centers. Organizations are confronted with difficult tradeoffs. The ability of providers across specialties to find common ground will be crucial, and leadership from providers will be key.45 Physicians have established themselves as leaders of the majority of ACOs today.46 It remains to be seen whether these organizations can keep providers together through the tradeoffs.

Patient trust in the ACO model has yet to be established. The managed care backlash of the 1990s suggests that patient buy-in will be crucial for the sustainability of ACOs. ACOs can have similarities to the HMO that traditional produce negative associations, including downside risk, gatekeeping, or managed care techniques. To earn patients’ trust, ACOs will need to prove their value, such as through delivering better preventive care, less expensive care, more holistic care through stronger teams of providers, or smoother transitions of care across settings. The task of primary care medical homes to provide patient-centered care and coordinate across specialists effectively will be crucial. While today’s ACOs may be better positioned because of risk sharing, quality bonuses, risk adjustment, electronic medical records, or other innovations, the patient’s experience may ultimately be the arbiter.