On the Perficient Health IT blog, Christel Kellogg writes:
I am hearing that carriers are staying away from ACOs and are not planning on partnering. What have you heard?
This is one of those blip-on-the-radar-screen comments that jarred my attention — and it raises very important questions about industry dynamics.
First, let me expand on the issue. As I’ve written before, there are at least two broad categories of “accountable care initiatives”:
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.
The list of accountable care animals in the forest is likely to keep growing. For example, just this week Oregon announced details for CCOs (Coordinated Care Organizations) for Medicaid.
So how are different stakeholders likely to react to the opportunity of a formal ACO contracting with commercial health plans? Let’s look at this from a couple of different angles.
Here’s my sense of how a formal ACO (formed primarily for contracting with Medicare) will think about this:
Our ACO needs critical mass. The start up costs for an ACO are huge. While we formed our ACO primarily to contract with Medicare, we need to contract with anybody and everybody we can — commercial health plans, Medicaid, employers… We need to gain critical mass and market clout as quickly as possible.
But health plans are likely to have a much more mixed reaction:
We see that Saint Acme has formed an ACO in the region. Do we want to contract with them? On the one hand, the ACO represents a group of providers who have taken the time and effort to organize themselves and are promising to coordinate care — this is not an easy thing to do. From that vantage point, contracting directly with a formal ACO is appealing.
However, one of the biggest concerns we have about ACOs is that they consolidate providers into a stronger bargaining unit — a union — and that can have the effect of reducing our bargaining ability and raising prices. This is a really big concern, and makes us hesitant.
We see another route worth considering. Let’s take a divide and conquer strategy. We don’t need to contract directly with the ACO — we can contract directly with individual care providers who are members of the ACO and we will be better able to control the terms and direction of the deal.
How will this play out? Not clear… my hunch is that most health plans will have significant concerns about contracting directly with ACOs.
The implications are huge:
- Can formal ACOs gain enough critical mass to survive and thrive if only Medicare wants to contract with them?
- Can care coordination across different ACO and AC-Like initiatives be achieved?
- How will competitive dynamics between care providers an health plans play out? The market is sending a mixed message right now — “We want health plans and care providers to work closely together, but we still want robust competition in the marketplace.”
Worth watching as this issue develops… your thoughts?