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How Do ACOs Differ from HMOs; What Is Their Achilles Heel?

Posted Dec 04 2013 12:00am

I have been relatively unenthusiastic about ACOs, thinking that they are merely reconstituted HMOs (see: The Emerging Role of ACOs; How to Define and Reduce Unnecessary ServicesHospital Executives Search for the Formula for an Accountable Care OrganizationACOs Won't Work According to Clayton Christensen in the WSJ ). I came across a recent article that discusses the same idea and suggests that both are highly dependent on cherry-picking healthy patients in order to succeed (see: Are ACOs Really Different from HMOs? ), Below is an excerpt from this latter article:

Accountable care organizations are a "fad" and "not very different from the HMO model… [with] a few bells and whistles, but otherwise it's the same old incentive to do as little as possible and find the healthiest patients you can," says [Richard Amerling, MD], a director of the Association of American Physicians and Surgeons....Accountable care organizations (ACO) aim to completely revamp how healthcare is delivered in the United States, promising better quality and lower costs. But physicians who have heard these promises before are wondering if ACOs are just the new version of HMOs, the same lofty concept dressed up in a new way....HMOs also were touted as the revolutionary way to save healthcare in America, Amerling says. In that model, the physician served as a gatekeeper for the insurance companies to control access to high-level care, tests, and hospitalizations. Under a capitation arrangement, the physician was paid a set amount per patient to coordinate care, which Amerling says provided a strong incentive to restrict patient access to care. In addition, capitation provided a bonus to the physician if total spending on patients was kept below a certain amount. The plan worked well if the physician's patients were overwhelmingly healthy, which encouraged cherry picking of the most profitable patients. But eventually the very sick had to receive care, and that threw the whole system off....

The differences between the HMO and ACO models are purely cosmetic, he says. ACOs also will have strong incentives to cherry-pick the healthiest patients and limit access to expensive medical care, and eventually that strategy will fall apart just as it did with HMOs, he says.....There are a few bells and whistles, but otherwise it's the same old incentive to do as little as possible and find the healthiest patients you can. [H]is concerns are borne out by the experience of the Pioneer ACOs that recently reported their results. All of the 32 health systems in the Pioneer ACO program reported improved scores on quality measures such as cancer screenings and controlling blood pressure, but only 18 were able to lower costs for the Medicare patients they treated. Two hospitals reported losing money on the ACO program and seven notified CMS that they will switch to a different ACO because of the monetary strain. Two said they will dump the ACO model and find another approach with less financial risk.

The notion that ACOs are little different than HMOs has been raised in other articles. Here, however, are some quotes from one that takes the contrary point of view and highlights differences between the two (see: Why ACOs Are not HMOs and Other Important Questions ). Here are two differences cited in this article:

The ACO is not a very new concept. It was a term that was coined by Elliott Fisher from Dartmouth Medical School, who is the director of Center for Health Policy and Clinical Practice. I hate to use the word HMO, but in a way, it’s almost like an HMO. It’s not really an HMO because it is actually a provider-led organization, not an insurance-led one. In an ACO, the participants agree to be accountable for a population of patients and have agreed to share, not just in terms care delivery, but also in terms of risk sharing: cost and utilization of services. The ACO attempts to increase access, promote higher quality, and reduce costs. And one hopes because of the organization’s direct responsibility its population of care, that it would achieve success in all three of those domains.

 I think one of the key differences here is that HMOs have been putting up walls in terms of patient options, whereas ACOs are breaking down those walls. One of the major tenets of the Medicare program and the Medicare pilot is that the patient would not be forced to choose networks of doctors. They are supposed to have a choice.

So HMOs were insurance-led rather than a provider-led with physicians acting as the gatekeepers in the former model. However and relating to Amerling's point in the excerpt above, HMOs and ACOs share the need to reduce the delivery of services to patients to reduce costs. While this is theoretically possible by becoming more efficient, I think that only the most innovative provider organizations are clever enough to accomplish this goal. It's far easier to merely cherry-pick the patients who enroll in the ACOs and thus skew the covered population to the healthiest. As Amerling also emphasizes, only 18 of the 32 "pioneer" ACOs were able to accomplish this goal for the Medicare patients they treated.

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