Posted 3/09/12 on the e-CareManagement Blog
The health care market is moving toward accountable care. There are at least two broad paths forward:
1) Formal Accountable Care Organizations (ACOs) by which care providers contract with Medicare
2) Informal Accountable Care-Like (AC-Like) arrangements between care providers and commercial health plans
What are the differences between these routes? I see at least 5 factors at play:
- Transaction costs
- Capital cost
1) Transaction Costs
ACO — Everyone needs their own attorney, including one for the new yet-to-be-created ACO entity. Expect to pay people during months of negotiations. Anticipate formal board meetings, minutes, white china.
Want to form an AC-Like arrangement? Gather people in a room and have a meeting. Paper plates and plastic cups. Yes, you’ll still need the lawyers to write up a contract.
ACO — Anticipate months of negotiation with partners to form the ACO. Anticipate months of negotiation with Medicare to hammer out a contract.
AC-Like arrangement — theoretically it could all be done in an afternoon.
ACO — Want to start small with an experiment? Sorry, Medicare has a long list of take-it-or-leave-it conditions in all their ACO models.
AC-Like arrangement — want to start with an experiment, e.g., putting nurse care managers in primary care physician offices? Pick up the phone and start negotiating.
ACO — Want to change something about your ACO internal structure? Start digging into the ACO by-laws. Want to change your contract with Medicare? Sorry, your deal runs for 3 years..
AC-Like arrangement — pick up the phone and start renegotiating.
5) Capital Costs
ACO — The American Hospital Association estimated that capital costs could range from $11–26 million.
AC-Like arrangement — won’t be cheap, but will depend greatly on what you plan to do.
The bottom line: AC-Like arrangements between commercial health plans and care providers will be MUCH simpler to create and maintain.