Integration shepherds providers to ACO pastures

Large group primary care practices, hospital risk sharing and integrated hospital systems are some of the key perpetrators linked with the formation of accountable care organizations according to new research published in this month’s issue of Health Affairs.

David Auerbach, a former Congressional Budget Office analyst, and colleagues at the Rand Corporation, analyzed 255 Medicare ACOs created under the Affordable Care Act.

Nationwide, the researchers found, hospital risk sharing and provider integration were greater determinants of ACO participation than regional average income, per capita Medicare spending, Medicare Advantage enrollment rates and physician density – indeed, those factors weren’t correlated with ACO formation.

The researchers found “wide variation” in the location of the ACOs, with large areas like the Northwest “essentially empty,” and other areas being ACO-dense, like the Northeast and Midwest.

In the 31 regions with at least 20 percent of Medicare fee-for-service patients in an ACO, the research team found, more than half of hospitals are affiliated with a health system and in joint ventures with physicians or physician groups, compared to a hospital affiliation rate of between 30 and 40 percent in areas without many ACOs.

The ACO hotspots also tend to have a greater percentage of hospital revenues coming from capitated or risk-sharing contracts, although Auerbach found a notable exception to the trend that raises the issue of integration’s double-edged sword for payers and patients – provider consolidation.

The five regions with greatest ACO penetration – New Jersey, Wisconsin, Michigan, Iowa and Kentucky – also have some of the highest proportions of hospital-health system affiliations, with rather concentrated provider markets as measured by the Herfindahl-Hirschman Index.

“These factors suggest that ACOs in those regions may be associated with dominant hospital systems,” Auerbach and colleagues wrote, a point of divergence from health maintenance organizations, which tended to disfavor concentrated provider networks.

Hospital and physician group integration are “key markers of where ACOs are forming,” Auerbach and colleagues wrote – and they found largely the same trend in private, non-Medicare ACOs.

As for other contributing factors, Auerbach argued, while areas of high healthcare spending may be “fertile ground” for ACOs, high costs are not so far correlated with ACO formation, as some have speculated, and it’s possible that high healthcare spending is actually a barrier to starting ACOs – indicative of a lack of infrastructure and collaboration.

At the same time, unnecessary spending and variable quality are among the chief priorities of accountable care policy. It’s kind of a “which comes first” question, whether integration breeds accountable care or whether accountable care breeds integration – and it may be depend on the location.

This story is based on an article published by Healthcare Payer News.