3 reasons for slowed ACO-growth

Although the healthcare industry initially jumped on the accountable care organization (ACO) bandwagon to improve healthcare outcomes, lower costs and boost patient satisfaction, there has been little growth in new ACOs since September and it appears as if the downward trend will continue.

Since the healthcare reform law passed three years ago, 488 ACOs have formed--and more than doubled since June 2012. But only 35 new ACOs have been announced since the end of January 2013 and that slowdown--combined with the slower growth in the number of individuals covered by ACO arrangements--is a troubling sign, according to a Health Affairs blog post.

David Muhlestein, Ph.D., director of research at Leavitt Partners, a healthcare intelligence business based in Salt Lake City, wrote that the significant decrease in growth is surprising but offered three reasons for the sudden decline:

The market is tapped out. "There are not many trailblazer organizations left that are ready and willing to adopt accountable care contracts that have not already done so," Muhlestein said. The organizations that aren't yet on the way toward an ACO model are likely content to let the others organizations determine how to successfully manage population risk, he said.

There is no proven ACO model. Some organizations are willing to accept risk and explore ACOs but are waiting for a proven model to emerge. The initial, mixed-results of the Pioneer ACO program don't explain what ACOs are doing effectively to manage patient populations, he said.

Payers are reluctant to offer ACO contracts. In some markets, there may only be one or two payers willing to enter into these contracts--a barrier for existing ACOs to expand their number of patients.

The second reason is the most important as non-ACOs represent the majority of physicians, physician groups and hospitals in the United States, according to Muhlestein. "For those preparing to become ACOs, when there is not a financial imperative to adopt risk-based payments now, there is a strong incentive to wait for other organizations to blaze a pathway that shows how to accomplish the goals of accountable care. Effectively, it allows existing ACOs to make (sometimes costly) mistakes for the developing ACOs to avoid," he said,

Muhlestein said the true measure of the future for ACOs is to wait and see if existing ACOs renew their contracts. If the vast majority sign on again, he expects another burst of ACO growth. Otherwise, ACO growth will likely grind to a halt.

For more:
- read the blog post