Accountable Care Organizations — The Fork in the Road | Health Policy and Reform

by Thomas L. Greaney, J.D.

Despite the uncertainty and controversy it has generated, the Patient Protection and Affordable Care Act (ACA) has sown the seeds for a major reorganization of the U.S. health care delivery system. In almost every region of the country, hospitals and physicians are forming (or talking about forming) accountable care organizations (ACOs) and entering into other arrangements designed to integrate care, manage chronic conditions, and enable evidence-based practices. Critical to the achievement of these ends are the regulations and guidance soon to be issued by the Centers for Medicare and Medicaid Services (CMS) and the Federal Trade Commission (FTC). One of the most important judgments these agencies will be called on to make entails determining how best to ensure that ACOs foster, not hinder, competition in health care markets.

Although not precisely defined by the new law or the theorists who proposed the concept, ACOs are best understood as affiliations of health care providers that are held jointly accountable for achieving improvements in the quality of care and reductions in spending. ACOs may take a variety of organizational forms, including integrated delivery systems, primary care or multispecialty medical groups, hospital-based systems, and even contractual or virtual networks of physicians, such as independent practice associations.¹ In designing an organizational framework, providers and regulators will have to contend with trade-offs involving such factors as control and governance of the organization, the extent of integration among providers, allocation of risk and rewards, and exclusivity of membership.

It appears likely that the regulations will allow for considerable variation in the form of ACO that providers adopt but will nudge them toward greater integration and more interdependent relationships. And well they should. Economic analyses of the current state of U.S. health care markets suggest that they are plagued by both fragmentation and concentration.² ACOs offer a much-needed vehicle for integrating health care delivery and reducing the well-documented shortcomings of the system that are attributable to payment and organizational features that reward high volume rather than low cost or high quality.

At the same time, ACOs do little to address the problem of market concentration. Indeed, the ACO phenomenon may well encourage some mergers, joint ventures, and alliances that will exacerbate this considerable problem.
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