Private Sector ACO Models Gaining Prominence

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September 11th, 2012
Categories: Health News

aco payment model
ACOs are regarded by many as the ideal way to align patient, provider and payer interests while overcoming several challenges facing the US healthcare system. These challenges include limited capacity to deliver consistent and effective care, poorly coordinated patient care and the rising costs of care.  ACOs have 3 major characteristics that separate them from other payer (public or private) and provider arrangements:

 1.    Shared Savings – Providers receive bonuses if their patients’ healthcare costs are below a proposed amount based on their own historic spending. The size of these bonuses is tied to the amount of savings the ACO achieves.

2.    Accountability for Quality – ACOs are monitored on numerous quality metrics with their performance being tied to shared savings eligibility and the amount of shared savings they receive.

3.    Free Choice of Providers by Patients – Patients are not “locked in” to only seeing providers at a specific ACO and are free to  seek care from any provider that accepts their insurance.

The ACO model ties a portion of provider reimbursement to cost efficiency and quality benchmarks. It rewards providers for being more judicious in the amount and type of care provided while promoting greater coordination and care management of patients with chronic conditions. The model also focuses on outcomes and quality by penalizing providers that withhold medical care solely to meet financial goals.

Because of this potential, ACOs have seen significant interest from the private sector. The Patient Protection and Affordable Care Act contains provisions concerning the establishment of ACOs only under the Medicare Shared Savings Program. These provisions do not apply to private insurers, however they have played a role in guiding the structure, operations, reporting and plan designs. Risk sharing, accountability and the pursuit of higher quality and cost effective care are central to both public and private ACO models.

Private Insurer ACO Partnerships

Various healthcare organizations and private insurers have been at the forefront of ACO expansion by developing models associated with private health plans. According to several reports, these ACO partnerships have been driving the growth in the number of ACOs across the country much more so than Medicare initiatives. Early results from these ACOs look promising, indicating many care quality improvements, readmission decreases and cost savings.

Hospital systems, physician groups and independent practice associations working within the ACO model have indicated that they favor partnerships with private payers due to the greater flexibility in design and technical support they receive. Private insurers have taken into account the varying levels of experience, capability and readiness of healthcare providers entering into an ACO arrangement, recognizing the benefits of customizing their arrangements to meet the abilities and needs of their provider partners and respective patient populations. They also appear to be more willing to experiment with various payment and risk bearing models. Some of the criteria used to evaluate a providers’ readiness to enter into an ACO arrangement includes:

  • The level of clinical integration
  • Presence of a strong, forward thinking leadership
  • Willingness to enter into a long-term relationship
  • The ability and initiative to implement change
  • Existence of a strong IT infrastructure
  • Sufficient patient population size
  • Willingness to participate in performance-based reimbursement model
  • The ability to accept some form of financial risk

The Importance of Support

According to a study by America’s Health Insurance Plans (AHIP), “Technical assistance to providers has been identified as one of the key requirements to their success in accountable care arrangements.” Based upon the needs and requirements of their provider partners, health insurers have been offering support in various ways. These may include:

  • Assisting with population health management by providing up-to-date claims data as well as analytical reports that highlight progress and identify gaps in care
  • Connect providers with health plans’ disease and case management services by embedding nurse case managers in provider practices, providing clinical decision support tools, such as condition-specific care guidelines and hosting monthly clinical sessions to facilitate greater collaboration
  • Providing access to health information exchange systems that allow for two-way flow of information for better case management and clinical decision support
  • Helping manage financial risk through predictive modeling and the provision of stop loss coverage or reinsurance

As the proliferation of both private and public ACOs continues, there will be much to learn from both ACO models. The structure of payment incentives, the assessment of organizational capabilities and methodologies to improve quality and outcomes are likely to continue evolving. Information technology will continue to play a central role and an increases use of data to support population management, plan design and distribution of incentives.


  • Abhimanyu Dhar says:

    One of the characterstics of an ACO is that the medicare patient can choose their own providers. How does this work in the Private Sector ACO Model?

    • William Bozoki says:

      With private sector ACO models insurers usually build an incentive into their policies for members to utilize the ACO for their medical needs. Within the ACO, the member has the freedom to choose whichever providers (primary care, etc.) they wish.