The Real Promise of ‘Accountable Care’: New ACOs reward health providers for outcomes, not for cost cutting.


For decades, the inexorable rise in health-care costs has been accompanied by growing evidence of large variations in care and widespread gaps in quality and efficiency. Almost daily, new developments come along that in other industries would improve quality and access—such as Web- and phone-based services, electronic transactions and more-convenient facilities. In health care, however, innovative technologies and services seem to increase costs and complexity.

This may be changing, largely because there is an emerging pathway for health-care providers to use such innovations to improve health and reduce costs—and to avoid being punished financially for their investments. Accountable care organizations at their heart are about aligning provider financial incentives with patient needs for better health and lower-cost care. Unlike traditional third-party, fee-for-service insurance, which pays more for doing more, the payment models underlying accountable care pay providers more for achieving better care at a lower cost.

This is not a return to 1990s-style HMOs, which put the focus largely on reducing costs, so that patients and their physicians worried about stinting on care. Under the ACO payment model, the health-care providers aren’t eligible to keep the savings from lowering costs unless they achieve measurable quality improvements. Such quality measures weren’t available in the 1990s and can’t come primarily from insurance companies.

They are generally derived from surveys of patients and the providers’ own clinical data systems—augmented by data from insurers—which are used to track and improve patient care. The emphasis is on reducing costs through new provider organizations that are better able to coordinate and improve care for patients and thereby eliminate unnecessary tests, emergency-department visits and hospital readmissions.

We have identified more than 320 ACOs across the country, with diverse organizational forms. Some are prominent and well-established integrated-delivery systems, such as Cedars-Sinai in Los Angeles or Partners HealthCare in Boston. Many others are forming out of well-established physician networks, such as Hill Physicians in Northern California, or Atrius in Boston.

But a substantial fraction of ACO activity is coming in newer forms. About half of the Medicare ACOs we have tracked are novel networks led by physicians. For example, Optimus Healthcare Partners is a New Jersey network of 550 primary-care physicians, many in single-physician practices. They have joined the ACO because it offers them additional technical and clinical support that will allow them to provide better, more coordinated care—and to receive a substantial share of the savings from keeping their patients healthy.

Walgreens is sponsoring three physician-led ACOs that include pharmacies to serve as low-cost, convenient alternatives to emergency rooms and physicians’ offices, whether for treating the flu or for the management of chronic diseases. Still other ACOs have been formed by coalitions of community or rural health centers, including federally qualified health centers.

Based on our surveys and interviews, what these ACO manifestations have in common is an ability to innovate in how care is provided, supported by the new approach to payment. The innovations include replacing office visits with in-home monitoring tools and smartphone applications, the use of “patient coaches” to help at-risk patients avoid complications, and greater involvement of patients in managing their own care and making important decisions. Many ACOs in the private sector are passing the savings on to patients in the form of lower premiums and copays.

The ACO model is not just a new class of health-care organization. It is also flexible, evolving approach to payment reform that is creating a market for creative approaches to health care. As new types of ACOs, such as Optimus or the groups that involve community clinics, learn effective ways to meet the needs of patients poorly served by current high-cost providers, these organizations may be able to compete successfully against traditional health-care organizations.

Some ACOs are likely to fail—change is hard. Clearly, too, making these innovations pay off will require other reforms, including a regulatory environment that focuses competition in local markets on better health and lower costs, and more transparent data regarding cost, price and quality. There is also a need for patients to share in the savings when they choose their providers, ACOs and health plans wisely.

The early evidence from private and public ACOs suggests that real savings are possible. The right direction for health-care policy is to build on ACO successes through further steps to reward low-cost innovation, while steering support away from health-care providers who are unwilling to change.

Dr. Fisher, director for population health and policy at the Dartmouth Institute, is professor of medicine at the Geisel School of Medicine at Dartmouth. Dr. McClellan is director of the Engelberg Center for Health Care Reform at the Brookings Institution. Mr. Shortell is professor of health policy and management and dean of the School of Public Health at the University of California, Berkeley.

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