ACOs: Getting bigger inhibits efficiency, study finds

For all the talk about economies of scale in healthcare and other industries, accountable care organizations are not exactly enjoying those at this point in time, according to Indranil Bardhan, professor of information systems at The University Of Texas At Dallas.

Bardhan and his team conducted a three-year study of the performance of 400 accountable care organizations, with 2013-2015 data drawn from the databases of the Centers for Medicare and Medicaid Services.

"We uncovered very interesting insights; for example, the size of an ACO in terms of beneficiaries covered is inversely related to performance," Bardhan explained. "The larger the size of an ACO, the more likely it is to be inefficient."

In the study's model, Bardhan said, across the entire set of 400 ACOs, the researchers found that a 1 percent increase in health IT usage was associated with a 0.5 percent increase in the level of efficiency.


Learn more at the Pop Health Forum in Boston, April 3-4, 2017. Register here.​


"Health IT helps to improve the efficiency of an ACO," Bardhan added. "What we found was that health IT serves as a coordinating mechanism that allows providers in an ACO to coordinate their care and provide better services, which improves the overall efficiency of the ACO. Health IT has a positive moderating effect on the relative performance of ACOs."

That said, while it is easy to measure performance in the hard sciences, Bardhan said that when it comes to measuring the relative performance of an organization, things become tricky.

"Working in healthcare informatics and analytics for the last nine years, I can say that healthcare, especially with respect to ACOs, is fascinating because there is not just one single output measure that you are using to compare performance," Bardhan explained. "It's a classical problem of multiple outputs, multiple outcomes, where you are looking at cost savings as well as quality achievements. In this kind of setting, it is difficult to measure the performance of organizations against each other when you have multiple outputs that cannot easily be transformed into a single dollar number."

For instance, it's difficult to put a dollar number on achievement of quality outcomes, which is why healthcare needs a technique that accounts for that, Bardhan said.

"Unlike in the hard science of physics, there is no absolute measure of performance; when you are comparing organizations, it is all relative to each other – how is one ACO doing against another ACO that is best-in-class?" he said. "So we use a technique that is fairly well known in the literature of operations research, it's called data envelopment analysis, a mathematical modeling technique that allows you to compute the relative performance and efficiency of ACOs and measure them against each other. That is how I got started looking at relative performance of ACOs, because there is this multiple input/multiple output setting that makes it hard for regular statistical models to work."

Bardhan will be discussing ACOs and population health issues at the HIMSS and Healthcare IT News Pop Health Forum in Boston, April 3-4, 2017 at the Westin Copley Place. Register here.​