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What’s the Difference Between ACOs and “AC-Like” Arrangements?

A lot. AC-Like arrangements will be MUCH simpler to create and maintain.

The health care market is moving toward accountable care. There are at least two broad paths forward:

1) Formal Accountable Care Organizations (ACOs) by which care providers contract with Medicare

2) Informal Accountable Care-Like (AC-Like) arrangements between care providers and commercial health plans

What are the differences between these routes? I see at least 5 factors at play:

  • Transaction costs
  • Timing
  • Incrementalism
  • Flexibility
  • Capital cost

1) Transaction Costs

ACO —  Everyone needs their own attorney, including one for the new yet-to-be-created ACO entity. Expect to pay people during months of negotiations. Anticipate formal board meetings, minutes, white china.

Want to form an AC-Like arrangement? Gather people in a room and have a meeting. Paper plates and plastic cups. Yes, you’ll still need the lawyers to write up a contract.

2) Timing

ACO — Anticipate months of negotiation with partners to form the ACO. Anticipate months of negotiation with Medicare to hammer out a contract.

AC-Like arrangement — theoretically it could all be done in an afternoon.

3) Incrementalism

ACO — Want to start small with an experiment? Sorry, Medicare has a long list of take-it-or-leave-it conditions in all their ACO models.

AC-Like arrangement — want to start with an experiment, e.g., putting nurse care managers in primary care physician offices? Pick up the phone and start negotiating.

4) Flexibility

ACO — Want to change something about your ACO internal structure? Start digging into the ACO by-laws. Want to change your contract with Medicare? Sorry, your deal runs for 3 years..

AC-Like arrangement — pick up the phone and start renegotiating.

5) Capital Costs

ACO — The American Hospital Association estimated that capital costs could range from $11–26 million.

AC-Like arrangement — won’t be cheap, but will depend greatly on what you plan to do.

The bottom line: AC-Like arrangements between commercial health plans and care providers will be MUCH simpler to create and maintain.

ADDENDUM: A 6th difference between ACOs and AC-Like arrangements: click here

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