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Accountable Care Organizations in California: Lessons Learned

by Clive Riddle, November 10, 2010

While attending the recent Accountable Care Congress in Los Angeles, I had the pleasure of hearing Accountable Care Congress give a presentation on the recently released Integrated Healthcare Association white paper on Accountable Care Organizations in California. I highly recommend you check out the document at:

The 32 page report includes some great data and discussion, and makes the following nine points regarding lessons learned from the California experience to date:

  1. A variety of organizational structures are effective at delivering high quality coordinated care; at least as important to success as structure are an organization's capabilities, culture, and infrastructure, as well as the alignment of goals between the organization and its individual physicians.
  2. In California, a range of relationships exist between physician organizations and hospitals. Alignment of incentives between physician organizations and hospitals offer important opportunities for performance improvements across the entire continuum of care.
  3. As a method of payment, capitation can be effective at encouraging coordinated care, but payment methods should vary across ACOs depending on an organization's ability to assume risk. Fee-for-service payment with shared savings has not proven a successful incentive for the efficient delivery of care.
  4. Health plans acting in concert on payment methods and performance measurement helped facilitate the growth of California's provider organizations, and should also play an integral part in fostering ACO development nationally.
  5. ACOs are not a panacea for health care spending control. Some large provider organizations have gained bargaining power and raised prices. Capitation payment and consumer cost sharing partially offset tendencies toward raising prices.
  6. ACOs must be agnostic to insurance type; most provider organizations in California have focused on commercial, Medicare, and Medicaid HMO plans for their patients, but for ACOs to be viable across the country, mechanisms must be found to encourage PPO and traditional Medicare and Medicaid patients to use their services.
  7. Balancing patient choice with the desire to decrease costs and effectively coordinate care is difficult. California's experience underscores the challenge of promoting care coordination in an environment of unrestricted provider choice.
  8. Regulation of the financial solvency of provider organizations is important to ensure market stability.
  9. Consumer protections from capitated provider organizations need to be balanced, not overburdening.

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