Accountable Care Organizations - Ready for Prime Time or Not?

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Correspondence Details:Sylvan Lee Weinberg, MD, MACC, 4555 Southern Boulevard, Dayton, OH 45429. E:

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“Get ready for a new healthcare acronym that could one day become as common as health maintenance organizations (HMOs) and preferred provider organizations (PPOs).”

These words, written by Tim Eaton last month in The American Statesman, seem prophetic because the acronym to which he refers is ACO—accountable care organization. The concept of ACOs appears in the Patient Protection and Affordable Care Act (PPACA), the controversial healthcare reform bill—often referred to as Obama Care—created to improve healthcare delivery by incentives to improve quality, outcomes, and the value of care.

To this end, the ACO as a key element of PPACA healthcare reform legislation is intended to facilitate co-ordination and co-operation among doctors, hospitals, and ancillary personnel to reduce costs and increase quality for Medicare patients. An ACO is an institution composed of doctors, hospitals, and ancillary personnel who agree to be accountable for the quality, cost, and comprehensive care of Medicare patients enrolled in traditional fee-for-service care who are assigned to a specific ACO. While the ACO as such will not come into existence until January 1, 2012, there are entities today that might well qualify as ACOs, namely group practices, networks of practices, and joint ventures of doctors and hospitals employing physicians, among other possibilities.

Nevertheless, the PPACA legislation offers at best vague information on the corporate, structural, financial, and operational arrangements that will characterize an ACO. The Centers for Medicare and Medicaid Services (CMS) has yet to provide specifics on policies and regulations. ACOs may well succeed in controlling costs and unnecessary procedures and services and improving outcomes, but exactly how this will be accomplished has yet to be defined. The term ‘accountable care organization’ refers to an institution that maintains high quality in outcomes as well as in financial controls. It is projected that an ACO, which of course will not exist until after January 1, 2012, will consist of physicians, facilities, and personnel adequate to care for 5,000 Medicare patients assigned to a specific ACO. Quality control of each ACO will, as currently planed, be monitored by the National Committee for Quality Assurance’s web-based survey tool, scored from level 1 to level 4 on improved quality, increases in patient satisfaction, and lower per capita costs of Medicare over the next 10 years. Some of this will come from cuts in doctor reimbursement.

There is also the specter of the market power by which a large and powerful ACO may cause an increase in prices in a community that it dominates. A further issue that cannot be ignored is the potential for antitrust litigation. Such litigation may be raised by both patients and doctors who may feel harmed by the power and market dominance of a large and powerful ACO, particularly in a relatively small community.

At this time, one can only speculate on how the ACO concept will be received by both doctors and patients. It is indeed a seachange from the practice of medicine as we know it today. In the current literature, I can find two authoritative opinions that differ dramatically. One is from Dr Jeff Goldsmith, whose opinion piece is entitled ‘The Accountable Care Organization: Not Ready for Prime Time.’ The other view is from Dr Aaron McKethan, titled ‘Moving from Volume Driven Medicine Toward Accountable Care.’ Each author uses three to four pages of very small print that obviously cannot not be alluded to here in great detail. Each of the adversaries in this conflict of ideas feels strongly and resolutely in the position taken. I have chosen a brief excerpt from each physician to epitomize his position.
Dr McKethan holds that: “Achieving major delivery system reform will not be quick or easy. But it should be very clear by now that it will not happen under the status quo of existing payment systems, or through patches or add-ons to those systems. Only by fostering real accountability for results will we be able to address the major gaps in quality and costs in our healthcare system. We believe ACOs represent a critical step in moving away from purely volume-driven payments to payments based on what we really want to support: better health and better care at a lower cost.”

Meanwhile, Dr Goldsmith states that: “The sad reality is that most hospitals, even the well managed ones, simply lack the tools, leadership and leverage to enable them to bear and manage global risk. Many will not possess them in a decade. The mandatory ACO (apparently still a viable option in the June 2009 Medcap Report) is one of the worst health systems reform ideas since the Health Systems Agency. Fisher and his colleagues are attempting to broaden the idea to encompass independent practice associations (IPAs), existing multispecialty groups, even academic health centers. But the core idea remains that physician communities and hospitals in defined geographies are viable academic units. They are not.

The ACO idea may be worth experimenting with, but if recent history is any guide, it is not an idea worth betting the Medicare program’s future on. As a vehicle for reorganizing medical practice at the community level, ACOs are not ready for prime time.”

Perhaps uncharacteristically, at this time I am not going to express an opinion on the issues herein debated. Rather, I urge and encourage all who have read this article to send us your opinions for publication in the next issue of The American Heart Hospital Journal. I assure you the controversy, at that time, will still be far from settled.