Private accountable care organizations are hospital- or physician-led counterparts to government initiatives like Medicare shared-savings plans and Pioneer ACOs. Private health care organizations have been exploring these arrangements for decades, particularly in California, where coordinated and accountable care has boomed since the 1970s. Experts predict their numbers will begin grow dramatically over the next several years as the market adapts in response to health care reform.
Legislative basis: The Patient Protection and Affordable Care Act and subsequent ACO regulations suggest indirect support for private accountable delivery structures. However, the private sector has been experimenting with outcomes-based payment and delivery structures for several decades in an effort to more efficiently manage care and costs.
Rules and regulations: Private accountable care organizations do not face ACO-specific restrictions like their government-appointed counterparts in the shared-savings and Pioneer programs, and can therefore experiment with various payment and care models, independently determine cost and quality goals for providers, and choose their contract terms (e.g., length of commitment). In doing so, however, any arrangements must still meet other applicable laws and regulations such as the Health Insurance Portability and Accountability Act, federal and state antitrust laws, federal and state anti-kickback laws, state licensing laws, and various other federal and state laws applicable to payers, providers, and delivery systems.
Funding models: Private accountable care organizations use various funding models, including:
- Shared savings, which offers providers bonuses based on plan savings
- Shared risk, which exposes providers to potential loss as well as gain
- Global risk
The organizations are free to set funding guidelines as they choose, including determining caps on savings and losses as well as choosing the financial and quality goals providers must meet as part of the agreement.
Care model: Private accountable care organizations are generally structured as virtual integrated delivery networks, where health care providers and facilities across the continuum of care are connected and aligned via integrated technology. Some are instead structured as vertically aligned integrated delivery networks, which own the entire continuum of care. In both arrangements, accountable physicians coordinate all aspects of care for their patients across the network. This is usually a primary care physician — but for patients with complex or chronic conditions, a specialist might coordinate care.
Critical success factors: Most private accountable care organizations allow patients to see any provider who accepts their insurance — but accountable providers are responsible for all care their attributed patients receive, whether inside or outside the ACO. Therefore, these organizations must develop strategies for preventing network leakage and methods for controlling costs and quality even when patients choose providers outside the ACO. These might include facilitating communication about patient care with non-ACO providers, developing rich provider networks to encourage patients to choose physicians and facilities within the ACO, and providing financial incentives (e.g., lower copayments) for patients to choose ACO providers.
Challenges: Health care organizations in private ACOs will initially operate under a mix of value-based and fee-for-service contracts, and must navigate making the fundamental changes necessary to manage population health in tandem with fulfilling fee-for-service contractual arrangements that reimburse for production alone. This balancing act is vital to the success of an organization’s accountable care initiatives. It will be necessary for all organizations in accountable delivery systems, whether they are managing commercial or Medicare populations.
In addition, these organizations often must negotiate solutions to client-specific requirements that might negatively impact the plan’s performance. For example, employer clients worried about member satisfaction might choose to offer a broad provider network that includes certain high-cost physicians and hospitals rather than a tighter network that is more cost-efficient — which would reduce the plan’s ability to manage costs.
Advantages and disadvantages: Advantages of private accountable care organizations include:
- The less-regulated environment offers potential for more innovation and experimentation, including greater flexibility in funding; political independence; and alignment among payers, providers, and employers
- Successful private arrangements can serve as models for government-run programs
- Coordinated care arrangements have historically earned greater profits
- Plan savings are distributed back to the system in the form of incentives payments and bonuses
Potential disadvantages of private ACOs include:
- Implementing and maintaining these arrangements across large geographical areas can be challenging and expensive
- Accountable physicians have limited control over care patients receive outside the ACO
- There is ongoing conflict between moderating health care costs and maximizing member satisfaction
Also in the series
Accountable care delivery and payment structures: An overview
Medicare shared-savings accountable care organizations
Pioneer accountable care organizations
State health insurance exchanges
Medicare Advantage with physicians at risk
Medicaid health maintenance organizations
Bundled payment arrangements