The Leavitt ACO Report: Does it Overstate or Understate Accountable Care Activity?

Vince Kuraitis

Posted 11/30/11 on the e-CareManagement Blog

Accountable Care Organizations (ACOs) have been likened to

unicorn — a fantastic creature that is vested with mythical powers. But no one has actually seen one.

camel — a horse designed by a committee, one that already has its nose in the tent

With this background, you can begin to appreciate the difficulty of conducting an accurate census of ACO animals in the wilderness.  Yet, this is exactly the task undertaken in the excellent Leavitt Partners report measuring ACO activity in the US.

As I will explain, the Leavitt report has the potential both to overestimate and underestimate ACO and accountable care-like activities. In my judgment, however, it’s far more likely to be understating just how much accountable care activity actually is going on.

Findings in the Leavitt Report

The Leavitt researchers “identified ACOs from news releases, media reports, trade groups, collaborations and interviews through the beginning of September 2011. Also included were entities that either self-identified as being an ACOs or specifically adopted the tenets of accountable care.”

The report counts 164 ACOs — 99 that are primarily sponsored by hospital systems, 38 by physician groups, and 27 by insurers.

Here’s how Leavitt summarized their results:

  1. Dispersion of accountable care organizations varies significantly by market.
  2. Certain regions of the United States are devoid of accountable care organizations.
  3. Hospitals and hospital systems are the primary backers of ACOs.
  4. Significant investment in the accountable care model exists independent of the Medicare Shared Savings Program.
  5. The success of different accountable care models is yet unproven.

You can listen to a 30 minute podcast interview with Leavitt researchers Andrew Croshaw and Thomas Merrill. The interview is skillfully conducted by Gregg Masters on blogtalkradio.

Are the Findings Accurate?

I’ve written before about the critical distinction between “accountable care” and ACOs — they’re not the same thing. If there is one suggestion I would offer the Leavitt researchers, it’s that the next census should better distinguish between formal ACOs and other accountable care-like (AC-Like) activities.

A formal ACO organization is a legal entity formed by care providers — it is incorporated, has a Board, holds meetings, is registered with the Secretary of State.

Informal, AC-Like initiatives can be created through contracts. The parties simply get together and agree to develop an initiative. They might choose to announce or not to announce their initiative publicly. Commercial payers are much more likely to be involved in AC-Like activities — in many cases even leading the charge.

How accurate is the Leavitt census of ACO activity? I can see that it has potential both to overstate and understate accountable care initiatives.

“Facade ACOs” — Potential to Overstate Activity

There is potential for the Leavitt report to be overstating ACO activity — where an ACO is identified and counted in the report, but really doesn’t have much funding or momentum behind it.

I can think of a number of scenarios where care providers might want to create a Facade ACO:

The ACO is a defensive tactic. “We understand that health care purchasers are really pushing for this accountable care thing…but we recognize that this model is not in our economic interests. We hope the urge goes away.  Our building an ACO is like building a nuclear bomb — we need to have it ‘just in case’ our enemies attack us, but God forbid that we ever have to use this thing.”

The ACO is a competitive response. “Our competitors have created an ACO. We need to show our Board and community that we are responding to this competitive threat.”

The ACO is underfunded. “While CMS estimated that it would take about $2 million to build out ACO infrastructure, the American Hospital Association has estimated that the actual amount ranges between $11 to $26 million. We like the idea of an ACO, we just don’t have the money to do it right.”

“Under the Radar” AC-Like Initiatives — Potential to Understate Activity

It is also possible that the Leavitt report understates the amount of AC-Like Initiatives, especially ones where payers are playing a significant role. Created by private contracts in closed conference rooms, these initiatives could be under the radar and not easily discoverable in a census.

I can also think of a number of other scenarios where AC-Like initiatives might not get counted in a census:

Avoiding antitrust scrutiny. “We are a powerful collection of hospitals and doctors in our community. We want to stay under the radar as long as possible so that we get more clarity about antitrust enforcement. We do not want to trip an investigation by the Feds.”

Gaining competitive advantage. “We don’t want our competitors to know what we’re up to.”

Pilots. “We like the ideas of dipping our toes in the water with ACO-like activities, but we don’t want to go through the cost and hassle of setting up a formal ACO organization yet. Let’s try some experiments and see how they go.”

What’s the Bottom Line? Overstating or Understating Accountable Care Activity?

Ultimately we don’t know, and I am very sympathetic to the methodological challenges the Leavitt researchers have had to deal with. Given these inherent challenges, the Leavitt report is a much needed and thorough first effort at an ACO census. The researchers also fully acknowledge the limitations of their research.

That said, in my judgment the report likely vastly understates ACO-like activity.


In the past year, I’ve seen commercial payers embrace AC-Like initiatives. A few years ago payers tentatively began accountable care experiments; in the last year most payers have embraced accountable care as a mainstream business strategy.

Even though commercial payers remain wary of provider consolidation through formal ACO organizations, they get the shift from Volume to Value that health care purchasers are demanding.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s