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Doubting the Accountable Care Organization B-Model

New Healthcare Business Model or Edsel Model?

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By David Edward Marcinko MBA http://www.CertifiedMedicalPlanner.org


Dr. Marcinko with ME-P FansDefined by Professor Michael Porter at Harvard Business School, value is defined as a function of outcomes and costs. Therefore to achieve high value we must deliver the best possible outcomes in the most efficient way, outcomes which matter from the perspective of the individual receiving healthcare and not provider process measures or targets.

Sir Muir Gray expanded on the idea of technical value (outcomes/costs) to specifically describe ‘personal value’ and ‘allocative value’, encouraging us to focus also on shared decision making, individual preferences for care and ensuring that resources are allocated for maximum value.

Healthcare Value and ACOs

According to our Medical Executive-Post Health Dictionary Series of administrative terms http://www.HealthDictionarySeries.org  and health economist and colleague Robert James Cimasi MHA, ASA, AVA CMP™ of www.HealthCapital.com; an ACO is a healthcare organization in which a set of providers, usually large physician groups and hospitals, are held accountable for the cost and quality of care delivered to a specific local population.

ACOs aim to affect provider’s patient expenditures and outcomes by integrating clinical and administrative departments to coordinate care and share financial risk.

ACO Launch

Since their four-page introduction in the PP-ACA of 2010, ACOs have been implemented in both the Federal and commercial healthcare markets, with 32 Pioneer ACOs selected (on December 19, 2011), 116 Federal applications accepted (on April 10, 2012 and July 9, 2012), and at least 160 or more Commercial ACOs in existence today.

Federal Contracts

Federal ACO contracts are established between an ACO and CMS, and are regulated under the CMS Medicare Shared Savings Program (MSSP) Final Rule, published November 2, 2011.  ACOs participating in the MSSP are accountable for the health outcomes, represented by 33 quality metrics, and Medicare beneficiary expenditures of a prospectively assigned population of Medicare beneficiaries.

If a Federal ACO achieves Medicare beneficiary expenditures below a CMS established benchmark (and meets quality targets), they are eligible to receive a portion of the achieved Medicare beneficiary expenditure savings, in the form of a shared savings payment.

Commercial Contracts

Commercial ACO contracts are not limited by any specific legislation, only by the contract between the ACO and a commercial payor.

In addition to shared savings models, Commercial ACOs may incentivize lower costs and improved patient outcomes through reimbursement models that share risk between the payor and the providers, i.e., pay for performance compensation arrangements and/or partial to full capitation.

Although commercial ACOs experience a greater degree of flexibility in their structure and reimbursement, the principals for success for both Federal ACOs and Commercial ACOs are similar.



Dr. David E. Marcinko with 1960 Ford Edsel

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[The Edsel was an automobile marque that was planned, developed, and manufactured by the Ford Motor Company during the 1958, 1959, and 1960 model years. With the Edsel, Ford had expected to make significant inroads into the market share of both General Motors and Chrysler and close the gap between itself and GM in the domestic American automotive market. But, contrary to Ford’s internal plans and projections, the Edsel never gained popularity with contemporary American car buyers and sold poorly. The Ford Motor Company lost millions of dollars on the Edsel’s development, manufacturing and marketing].




Junking the Merit-Based Incentive Payment System (MIPS) would undoubtedly let the proverbial air out of the MACRA balloon, dealing a significant blow to the value-based reimbursement shift; right?


Although nearly any healthcare enterprise can integrate and become an ACO, larger enterprises, may be best suited for ACO status.

Larger organizations are more able to accommodate the significant capital requirements of ACO development, implementation, and operation (e.g., healthcare information technology), and sustain the sufficient number of beneficiaries to have a significant impact on quality and cost metrics.


But, will this new B-Model work? Isn’t leading doctors in a shared collaborative effort a bit like herding cats? And, what about patients, HIEs, outcomes management, data analytics and … Population Health via our colleague David B. Nash MD MBA of Thomas Jefferson University, often considered the “father” of Pop Health?

OR, what about the developing IRS scandal and full PP-ACA launch in 2014? Will it affect federal funding, full roll-out, or even repeal of the entire Act?

Your thoughts and comments on this ME-P are appreciated. Feel free to review our top-left column, and top-right sidebar materials, links, URLs and related websites, too. Then, subscribe to the ME-P. It is fast, free and secure.

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15 Responses

  1. 5 stages to ACO maturity

    Did you know that with recognition that “the path through accountable care is unknown,” IDC Health Insights has launched a new Accountable Care Maturity Model, designed to help healthcare organizations gauge their own status and make strategic decisions for funding business and IT initiatives?


    Hope R. Hetico RN MHA


  2. ACO Motivation

    Excellent essay Dr. Marcinko.

    The problem with ACOs, and other pay-for-performance programs, is that they don’t address the underlying motivations of doctors and healthcare providers.

    Many reasons that doctors and nurses deliver high quality care (or not) have little to do with money. These motivations include wanting to help others, do a good job at work, impress and compete with their peers, avoid lawsuits, or the internal self-motivation that allowed us to get through years of studying, training, and long hours.

    IOW: Culture change requires leadership, provider engagement, and sufficient incentive.

    So, just having the incentive – the pay-for-performance bonus — without a system response that impacts the fundamental motivations is doomed to failure.

    Dr. Clark


  3. Do Doctors Feel Threatened by Market Changes

    Of course, they do.


    Physicians are worried that the evolution to bundled payment and other payment reforms will further erode their earning capacity and diminish their independence.



  4. Accountable Care Organizations

    Some call it ‘managed care 2.0′, while the more cynical among us envision ACOs as the full employment act for management consultants, physician-executives and health care lawyers, shopping a not ready for prime time, if not fundamentally flawed ‘business model’.

    What do you think?



  5. Why accountable care organizations are like vegan barbecue

    Accountable care organizations are one of the key elements of the federal health reform law popularly known as ObamaCare, but many physicians and health policy experts think ACOs are a disaster waiting to happen.


    Now, count Jeff Goldsmith PhD, among them.



  6. ACOs

    Look – Being an optimist, I do think and hope that ACOs hold a bit of theoretical promise.

    But, if patients are able to seek care outside of the ACO structure, the risk on medical providers will increase just as their ability to contain costs will decrease.

    Thus, they may indeed fail under this format.

    Dr. David Edward Marcinko MBA


  7. Emerging Reimbursement Trends

    The ACA has ushered in a flood of new changes to the healthcare reimbursement system; principal among these changes is the implementation of payment bundling systems.

    Generally, a “bundled” payment is a single payment for reimbursement to multiple providers (e.g. both hospitals and physicians) that covers all services involved in a patient’s care.

    CMS described the goal of payment bundling as “…align[ing] the incentives for both hospitals and physicians, leading to better quality and greater efficiency in the care that is delivered.”

    Section 3023 of the ACA calls for CMS to establish national payment bundling programs, with Medicaid’s demonstration program established in 2012 and a Medicare pilot program slated for 2013. This section also gives the Secretary of HHS authority to expand the pilot program if, after five years, the Secretary deems the program effective.

    Robert James Cimasi MSHA AVA ASA CMP™
    via Ann Miller RN MHA


  8. ACOs and FFS Medicine

    Why hospitals live in two worlds when it comes to ACOs


    Dr. Marcinko, your ME-P and this f/u essay is very interesting.

    Many thanks.



  9. Physician Incentive and Motivation

    Dr. Clark – I just found this new essay on same.


    It seems that you and Dr. Marcinko may be like-minded.



  10. Quality and Savings in Pioneer Accountable Care Organizations

    According to Centers for Medicare & Medicaid Services (CMS), costs for the more than 669,000 beneficiaries aligned to Pioneer ACOs grew by only 0.3 percent in 2012 where as costs for similar beneficiaries grew by 0.8 percent in the same period. 13 out of 32 pioneer ACOs produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million to the Medicare Trust Funds. Pioneer ACOs earned over $76 million by providing coordinated, quality care. Only 2 Pioneer ACOs had shared losses totaling approximately $4.0 million. Program savings were driven, in part, by reductions that Pioneer ACOs generated in hospital admissions and readmissions.

    25 of 32 Pioneer ACOs generated lower risk-adjusted readmission rates for their aligned beneficiaries than the benchmark rate for all Medicare fee-for-service beneficiaries. The median rate among Pioneer ACOs on blood pressure control among beneficiaries with diabetes was 68 percent compared to the comparison value of 55 percent as measured in adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001. The median rate among Pioneer ACOs for LDO control among beneficiaries with diabetes was 57 percent compared to 48 percent in an adult diabetic population in 10 managed care plans across 7 states from 2000 to 2001.

    Publication Source: Centers for Medicare & Medicaid Services (CMS)


  11. Doctors strongly oppose giving up fee-for-service payments – JAMA survey shows

    Many physicians recognize the need to control health costs, but they’re not eager to change how physicians are paid as a means of achieving cost control.


    Here, Ezekiel Emanuel MD says physicians have adopted the approach of “blame others and persevere with business as usual” when it comes to cost control.

    So, you may be correct Dr. Marcinko.

    Dr. Jonesy


  12. Call me a Skeptic

    Dr. Jonesy – Here is a new essay: Managing Physician Skepticism About the Affordable Care Act.


    Many thanks for the comment and link.


    Dr. David Edward Marcinko MBA


  13. Do financial incentives to promote and reward physician behavior?

    In his book, “Drive: The Surprising Truth about what Motivates Us,” Daniel Pink emphatically says that all too often they don’t. Research shows that financial incentives do work – for narrow, routine, mechanistic tasks. But, the more complex the task, the more financial incentives targeted at it fail. In fact, they may even degrade desirable behavior by dulling creativity and inhibiting motivation. Larger rewards can even lead to worse performance.

    That’s a problem when we’re trying to solve big complex problems like fixing health care. But, there is hope. And there are motivators more effective than dollars.

    Pink suggests we focus instead on what really matters to the people we’re trying to motivate – like autonomy, the ability to direct one’s own life; mastery, the desire to get better at something that matters; and purpose, the chance to serve something larger than ourselves. These three motivators allow human beings to look broadly, get creative, innovate and be energized.

    And, that’s the basis of a critique on health care payment reform efforts in a new RWJF report.


    Hope Rachel Hetico RN MHA


  14. Physicians skeptical of ACO payback

    Physicians surveyed by athenahealth acknowledged that shifting reimbursement models away from fee-for-service arrangements will positively affect the quality of care.


    However, the majority of respondents said emerging care models will negatively impact profits and create more burden to get paid.

    Hope Hetico RN MHA


  15. HHS Adds 123 Medicare ACOs

    HHS announced the latest round of accountable care contracts in the Medicare Shared Savings Program, adding 123 additional ACOs and reaching about 1.5 million more Medicare beneficiaries.

    The new contracts, which bring the total number of Medicare ACOs to more than 360, come as there is still little known about how the earlier adopters have fared in the program, which was established under the Patient Protection and Affordable Care Act.

    The first cohort of organizations in the Shared Savings Program, numbering 27, entered the program in April 2012.

    Source: Andis Robeznieks, Modern Healthcare [12/23/13]


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