SHM and ACO’s: All Systems Slow

By  |  July 28, 2010 | 

Public Policy Contributor Brad Flansbaum writes…

I follow the literature on Accountable Care Organizations (ACO) because of its topical nature and its promise, as well as how it may fast track needed change in our healthcare delivery system.  I have written on this subject once before, and wish to return to it.

A Google search of ‘Accountable Care Organization’ published within the last 4 weeks returned 1.3 million hits.  In the result leads, phrases such as “promising,” “reduce costs and improve quality,” “hottest topic in reform,” abound.  Hospitalists acting as the fulcrum coordinators of inpatient care will play more than a minor role in any pilot or demo, and it is not accidental that the SHM Public Policy Committee is discussing next steps.  In addition, as adjuncts to this ACO discussion, we are dissecting payment bundling and value-based purchasing, which in essence, are continuums of the same concept.

A recent Health Affairs article, one of many published in the preeminent policy journal within the last year, reminded me of something I have tracked for the same period:  the disconnect between theory, and the actual number of sites engaged in anything remotely resembling the systems that need formation.  It does not hurt that heavyweights such as Elliott Fisher, Mark McClellan, Stephen Shortell, and others are throwing their endorsements and intellectual firepower behind the movement to bring these systems to fruition.

Much in the same fashion of Patient Centered Medical Homes, ACO’s will likely have qualification tierings that progress them up the risk-reward scale based on their level of integration, efficiency, etc.  A tier four system might resemble Kaiser Permanente, whereas a tier two might resemble an IPA, hospital, and SNF playing nice together in a limited way to produce some shared savings (see figure below).

The AHA numbers 5800 hospitals in the Unites States.  Of that total, I wondered, how many are engaged in an ACO type arrangement, or better, close to collaborating with other entities to move in a direction like those above.  I searched, and as there is no ACO professional association (although, see here, and here), and no federal registry, I could not determine numbers.  However, if references to “model systems” are any guide, beyond the usual suspects (Geisinger, Mayo, Intermountain, Kaiser, etc.), and a handful of lesser known beacons of bright lights scattered about, maybe the number of functioning ACO-oid type arrangements are a few dozen (or hundred to be generous).  Regardless, it is safe to say <1% of hospitals are living in that world, and it safer to say the rest of us are a tad few years away from getting there.

It is also discouraging to read the full body of ACO literature, and unlike some issues where opinions range far right to left scattered throughout countless publications, the same dozen or so papers (and equal number of authors) continue to surface without much variation.  If I evaluate an analysis on reform, invariably the term ACO will appear—and almost certainly, I can cite the references blindly without much effort (not because I am smart, but because when you have more fingers than substantive papers on the subject, it is not that difficult).

Almost as frustrating, and yes, sounding a bit curmudgeonly, begin any workgroup on ACO/bundling and there is an encouragingwhite cloud overhead.  Invariably though, as the group tumbles through the weeds, so many obstacles, stumbling blocks, and intangibles begin to crop up, that before you know it, you are not discussing ACO’s, but wholesale payment, delivery, provider, and patient reform.  In short, PPACA 2.0, 3.0, and 4.0.  Think I am kidding?  Just ask a group of hospitalists (or ER docs and intensivists), “who controls the money in any ACO?”  If you have half a day on your hands, listen in.  Another rub: discuss CHF, DM, or COPD bundles within ACO integration as opposed to hip repair, CABG or PCI, and you might as well make it a full day.  It is that complicated.

Also, after reading the April 2010 MedPAC report—along another vein, I noted the commissioners voted 17-0 to cut $3.5 billion from the indirect GME adjustments teaching hospitals receive, making its receipt contingent on meeting educational benchmarks (“P4P for training programs”).  Integrating endeavors such as that, with all the other pieces of reform—including HIT that allows systems to track and convey what needs oversight and reporting—is years away.  The recent release of meaningful use EHR guidelines, and in my opinion, a reasonably justified pushback from the docs and AMA, a rarity—even after first release modifications—is a testament to how slow and difficult a transformation we have before us.   I am not crying U-N-C-L-E, but Dunkirk comes to mind in thinking this undertaking through.  There are dozens of other snags of this sort just waiting to ensnare participants, and they are not minor.  The legal framework alone is worthy of half a bottle of aspirin.

Additionally, with all the attention this subject is getting, you would contemplate the savings are more than minor.  Every cent counts, but the CBO scoring of bundled payments at least, amongst the most promised group of potential interventions, leads the pack at ± 5%.  There will be great variation naturally, and the CBO is conservative and often incorrect in its estimates, but as a best guess, not as impressive an outcome as one would expect.  It is not the panacea, but just another tool in a very large toolbox:

In winding up, and on a more optimistic note, the playing field is not a completely barren.  I recently read about a new entity: Transforming Health Care.  It is a large “virtual” partnership of hospitals, doctor groups, health plans and consumer advocates within the California health-care system joining in an attempt to realize significant savings.  These kinds of experiments are encouraging, but scalability is the unknown, nevertheless hope springs eternal—especially when builds such as this go down in big cities.

The issue will be whether these trials are just an illusory blush on the rose—and will propagate what may be a Sisyphean notion—or a true breakthrough on which we can plant seeds.  I am betting on the former unfortunately, and my wager is the ACO will not materialize countrywide, and will find only limited success.  I hate to admit it—so much has been vested in the model—but I often think this is another example in a long line of healthcare facades in the guise of the emperor’s new clothes.  However, I do believe it will have its niche triumphs a la Kaiser and Puget Sound in focused regions of the country.  Stay tuned though, and you can bet SHM will be there surveying and weighing in on this topic for a time to come.  In the meantime, we can sit back and watch this ACO-like experiment play out and take notes.  I am sure Don Berwick and the GOP will be studying carefully—because things are sure not progressing as planned in Massachusetts.


  1. Mike July 29, 2010 at 6:22 pm - Reply

    Great post, Brad.
    I worked in a model where we had a lot of capitation thrown in with our medicare and commercial patients. I always felt the push to get the HMO patients out faster. Seemingly, in an ACO or AQC setup (like in MA), there would still be competing systems under one roof. Do you have any thoughts on how to manage a practice which may be in a hybrid state? On one hand favoring productivity (due to favorable commercial patients) on the other favoring QI/cost for the “alternative contracts?” Although they are not mutually exclusive priorities, seems like it would be messy and lend it self to practice variation like in some Orwellian paradigm…some patients more equal than others….

  2. Jack Percelay July 29, 2010 at 9:58 pm - Reply

    Wish I could fault your reasoning. Having trained and worked in Kaiser Northern California 20 years ago, I remain a big believer in the system. And the combined Northern and Southern California systems were certainly much more scalable than the Geisinger system. Certainly Kaiser wasn’t perfect, but it was effective in most areas. Biggest shortfall seemed to be in caring for Medicaid (or, as it’s called in California, Medi-Cal patients); very hard for a healthcare system to cure societies ills. But culture change is the prerequisite to spreading such systems into new areas, and it’s not clear that changing reimbursement paradigms will be sufficient to change the culture.

Leave A Comment

About the Author: Brad Flansbaum

Brad Flansbaum
Bradley Flansbaum, DO, MPH, MHM works for Geisinger Health System in Danville, PA in both the divisions of hospital medicine and population health. He began working as a hospitalist in 1996, at the inception of the hospital medicine movement. He is a founding member of the Society of Hospital Medicine and served as a board member and officer. He speaks nationally in promoting hospital medicine and has presented at many statewide meetings and conferences. He is also actively involved in house staff education. Currently, he serves on the SHM Public Policy Committee and has an interest in payment policy, healthcare market competition, health disparities, cost-effectiveness analysis, and pain and palliative care. He is SHM’s delegate for the AMA House of Delegates. Dr. Flansbaum received his undergraduate degree from Union College in Schenectady, NY and attended medical school at the New York College of Osteopathic Medicine. He completed his residency and chief residency in Internal Medicine at Long Island Jewish Medical Center in New York. He received his M.P.H. in Health Policy and Management at Columbia University. He is a political junky, and loves to cook, stay fit, read non-fiction, listen to many genres of music, and is a resident of Danville, PA.


Related Posts

By  | June 26, 2018 |  2
JAMA just published the largest trial I have seen on a Hospital at Home (HAH) model to date and the first one out in the last few years. It comes from Mount Sinai in NYC–who have led the pack in this style of care if national presentations are the judge. They launched the program three […]
By  | May 1, 2018 |  0
Prices from a chargemaster are “what a drunken billionaire would pay a hospital if his wife were not around to control the bastard.” — Uwe Reinhardt You might be asking why such an outlandish quote? Last week CMS proposed* to change the way patients see the costs of hospital bills.  So what you might utter. […]
By  | February 20, 2018 |  6
“We Need Creative Solutions” When I read or hear the sentence above, I think of one thing and one thing only. The solution is long in coming, involves input from multiple parties, has no obvious fix, is costly–in either money or time, and we undergird it by a whopper of a collective action problem. How […]