ACOs vs. HMOs: This Time It's Different

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Last week I came across this article titled, Balancing AMC Mission, in the New England Journal of Medicine. The article talks about how Massachusetts hospitals – specifically Mass General and Brigham & Women’s – have reduced costs in response to Massachusetts' healthcare reform bill passed back in 2006. As part of the reform, these hospitals participated in risk-based based contracts with commercial payers and Medicaid and Medicare. The contracts, covering 400,000 lives, have them share risk for medical expenses for patients who see primary care physicians (PCPs) in their network. If the cost of caring for the patients that see a PCP in their network exceeds that of a comparison group, they pay a penalty; if it’s lower than the comparison group, they share in the savings.

A lot of people have compared this approach – commonly known as an ACO (Accountable Care Organization) -- to the HMO failure of the 1990’s. The authors in the article point out a few reasons why this time it’s different that I thought were worth posting here:

  1. While the focus of the approach is on coordinating care through a PCP, specialists are much more involved in the coordination this time through automated referral management, virtual visits from specialists, team based care and home monitoring. As an example, they’re reducing costs for diabetes care by automating referrals to diabetes counselors and they’ve identified opportunities to do phone consultations with specialists, as opposed to face to face visits.
  2. They’ve added 71 “high-risk care managers”. These managers work closely with the PCP in coordinating the care for 200 high-risk patients. The additional investment in this population is a huge step forward. As we know, the 80/20 rule applies to healthcare – 20% of patients drive 80% of costs.
  3. They’ve consolidated all of their clinical and administrative systems into one electronic system – allowing for better, more efficient care coordination.
  4. Risk is now shared across their hospitals and their physicians group as opposed to centering risk and responsibility on the PCP.

These are significant differences that have resulted in some early signs of cost reduction. It’s refreshing to see super successful, massive hospitals getting on board and innovating as we move towards a system that manages health instead of manages sickness.