The Cost of Quality
It’s called an accountable care organization, or ACO, and it’s the hot concept in health care. But to Everett businessman Steve Neighbors, it’s more like a unicorn: “Everyone knows what it is, but no one’s ever seen one.”
To some, an ACO is a promising new way of organizing health care to improve outcomes for Medicare patients. To others, it represents a much-needed break with a current, flawed economic model. Some think it’s the last, best hope for preserving privately managed health care; others say it sounds like just the latest trendy acronym.
Dr. Gary Kaplan, chairman and CEO of Virginia Mason Hospital and Medical Center in Seattle, points to the daily influx of proposals from ACO consultants as a sign of how loud the ACO buzz is. Virginia Mason is considering forming an ACO, either alone or in partnership with another operation, such as Pacific Medical Centers, which focuses on physician services.
“I’d be shocked if virtually all the hospitals weren’t looking at it—to make sure they’re relevant in the market,” says Greg Vigdor, president and CEO of the nonprofit Washington Health Foundation, which aims to improve health and health care.
The specific catalyst for the boomlet is a provision in the 2010 federal Affordable Care Act that authorizes the creation of ACOs, described as organizations of health care providers that agree to be accountable for the quality and cost of the treatment delivered to participating Medicare recipients.
The sweetener for providers is that if the ACO delivers that care at a lower cost to the government than would otherwise be expected—based on expense history from the previous three years—then the ACO can share in the savings.
But what may be a more powerful force causing hospitals, clinics and insurers to catch ACO fever isn’t part of the federal legislation: It’s fear—fear that runaway health-care spending in a hard-pressed national economy could trigger far more draconian reforms than the ACO initiative.
“If we don’t embrace that [ACO initiative], what we’ll have is something we don’t want—something that eliminates the benefits in the United States that come from a market-based system,” says Kaplan at Virginia Mason, which operates several regional clinics in addition to its Seattle hospital.
Those benefits aren’t just BMWs and second homes in the San Juans for cardiologists. They include a high level of innovation and technology. But the problem is that, in the widespread view of hospital executives, clinic directors, insurers and others, the existing
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