Health Insurers: The Success Factor for Accountable Care Organizations?

Insurers chatting about ACOs

What a weird week it's been.  Mrs. Obama didn't mean it when she said she supported a NYC soda ban, President Clinton didn't mean it when he said he admires venture capitalists and Wisconsin voters didn't mean it when they said they wanted to recall Gov. Walker. While the Disease Management Care Blog ponders the possible causes, it takes comfort in knowing that the "dean of American health economists" Victor Fuchs always means what he says, and says what he means.

To wit:

"...the operational infrastructure required to create and manage ACO is found in large health plans, both not for profit and for profit."

Academician Dr. Fuchs knows of what he speaks, especially when he's writing in the Journal of the American Medical Association (JAMA).  In a viewpoint article titled "If Accountable Care Organizations Are the Answer, Who Should Create Them?", he describes the several things ACOs have going for them:

1) providers will be under less pressure to pursue top line revenue through overutilization of care resources,

2) pharmacy use will be tilted in favor of lower cost generics,

3) there'll be better primary and specialty care coordination, and

4) administrative savings will increase thanks to capitatation and not having to bill for individual services.

And which constituency, he asks, is in the best position to pull this off?   According to Dr. Fuchs:

Not employers. They don't have the skills.

Not physicians. While they understand cost-effective medicine, they've underinvested in systems, administration, customer service and financial functions.

Not Hospitals. They might have the capital and the professional expertise, but it's been focused on filling beds.  What's more, they could also come to anti-competitively dominate their local markets.

That leaves the insurers as the most "feasible" candidate.  Dr. Fuchs points out that they have capital, understand risk, possess the financial expertise and can manage disparate data sources.  They are also seeking provider ACO partnerships.  Examples of this, he notes, include UnitedHealth, Humana, Aetna, WellPoint and Highmark.

The DMCB couldn't have said it better but it did raise this a lot sooner.  It and colleague Vince Kuraitis argued that insurer-provider ACO alliances would emerge as a viable market alternative almost a year ago.

In addition to claiming some credit for helping DMCB readers scoop JAMA by almost a year, the DMCB also points out that it thinks some hospital or physician-led ACOs will ultimately prevail.

One key success ingredient for ACOs will be population health and care management resources.  It's no accident, says the DMCB, that commerical insurers like Humana and Aetna stand poised to succeed in the ACO biz.  In addition to their capital resources, awareness of the economics of risk, financial expertise and data skills, they've also been doing cost-effective PHM for years. 

The physician and hospital groups that catch up to the insurers on this will be the ones that prove Dr. Fuchs wrong.