Are ACOs Really About Quality?

When the subject of accountable care organizations first comes to mind, the common context is that of the ACO as a Medicare payment mechanism introduced as an element of Obamacare. However, to fully understand the economics of an ACO, you need to appreciate the fact that the model is not designed to be constrained to the Medicare arena. And, in fact, the economics of the creation of a functional ACO dictate that it must focus on a larger market. 

ACO formation is both capital and time intensive. By way of limited example only, there’s the legal and financial work in planning the structure, creation of the necessary entities, building the management and compensation structures, and developing relationships with physicians and convincing them, cajoling them, or even outright pressuring them to join.

 Given these high transaction costs – and once again, setting aside (at least for a few nanoseconds) the thoughts of shifting power and control — hospitals that create ACO structures will be predisposed to use them other than simply for purposes of chasing Medicare dollars: They will pursue private payer dollars as well.

 Physicians who become providers in an ACO believing that what is intended is simply another way of collecting and allocating Medicare dollars will soon find that a huge proportion of their entire book of business is now ACO business. If that is indeed the case, then it will functionally be as if you have one very large, or perhaps one sole, payor: the hospital. When that happens, will you still be running an independent practice?

Of course, this has significant economic implications for your financial future. It also has significant political implications vis-à-vis the medical staff: If all physicians are dependent upon the hospital for their livelihood, how independent can the medical staff ever be?

And, remember, that the reason – or excuse – that the model’s proponents use for the creation of an ACO is a drive to quality care. But if physician practice becomes more and more subject to the economic control of the hospital, what will happen to physicians’ satisfaction with medical practice and, therefore, with the quality of care that they give, even assuming every physician has patient care at the forefront of his or her thoughts?