HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Tuesday, July 23, 2013

Pioneer Accountable Care Organizations and Downside Risk--It's Deja Vu All Over Again

Numerous outlets, including the Washington Post, have reported that nearly one-third of the 32 Pioneer ACO's under the Affordable Care Act have left the program.  Almost half of th program participants  have failed to produce any cost-savings.  Most of those that have left have switched to the Medicare Shared Savings Program, which does not carry the down-side financial risk that the Pioneer ACO program carries.  One of the major reasons for leaving the program cited by those dropping out is that physician groups aren't accustomed to dealing with financial risk of this nature.

In the late 1990s, I practiced health care law in Seattle, Washington.  Among the folks I represented were physician-led organizations who had contracted with commercial insurers to accept downside financial risk for the cost of the care they rendered.  Invariably, when the accounting at the end of the contract term was done, the physician-led organization was told that it had incurred a loss, and owed money back to the insurers.  This tended to result in the four stages of litigation:  Disbelief, denial, blame, and filing a lawsuit, followed by the four stages of settlement:  Discovery, failed negotiation, mediation, and payment of substantial attorneys' fees. Ultimately, most physician-led organizations stopped accepting contracts with down-side risk, and insurers came up with different methods of controlling costs and ensuring quality of care, with varying degrees of success.  Clearly, there is more to facilitating the delivery of cost-effective, good-quality care, than merely putting all of the financial risk of the care on the providers.

When the Pioneer ACOs were first proposed, I wondered why anybody thought that the outcome of this experiment would be different than the mostly failed full-risk contracts that had been the rage in the late 1990's.  While the early ACO numbers indicate that some progress has been made (2/3 of the providers are remaining in the program, and almost 60% have produced some cost-savings), this early outcomes data should give us a reason to re-examine our assumptions about what it takes to change the way we deliver health care in the United States. Clearly, it's not all about financial incentives.


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