Arranged Marriages: The Evolution of ACO Partnerships in California

Media Advisory
Sept. 30, 2013

Alwyn Cassil (202) 264-3484 or [email protected]

WASHINGTON , DC—Market factors unique to California—large physician organizations experienced in managing financial risk for patient care, along with competitive pressure on both insurers and providers from the growing dominance of Kaiser Permanente Health Plan—have helped drive interest in developing commercial accountable care organization (ACO) partnerships, according to a new study by the Center for Studying Health System Change (HSC) on behalf of the California HealthCare Foundation.

Across the country, hospitals, physicians and other providers are collaborating with public and private payers on delivery system and payment reforms intended to slow health care spending growth and to improve the quality of care. Medicare initiatives to develop ACOs—groups of providers that take responsibility for the cost and quality of care of a defined patient population—have spurred interest in similar, commercial ACO contracting arrangements between private insurers and providers.

While most commercial ACO initiatives nationally focus primarily on new provider payment approaches that are incorporated into existing insurance products, the study found initial California ACO collaborations have combined payment changes with new limited-network ACO insurance products. These limited-network products include financial incentives for enrollees to use ACO providers; they typically are structured either as health maintenance organization (HMO) products that restrict patient access only to ACO providers or as preferred provider organization (PPO) products with reduced patient cost sharing for using ACO providers.

Initial experiences suggest that while some significant savings are possible, ACO efforts require intensive collaboration and investment to support care management and exchange of sensitive performance data. These commitments present challenges even in California communities where market conditions are more favorable for ACO development than elsewhere in the country.

The study, available here, explores factors that have spurred ACO activity in California, describes how the state’s commercial insurance market has affected ACO product design, and identifies market conditions in local communities that affect ACO product development and structure. The analysis also considers how market factors are likely to affect the evolution of commercial ACO arrangements in California and the rest of the country.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation's changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.