Why ACOs will succeed

Elliot CohenThere is a lot of speculation that ACOs are going to fail. Many of them will fail. They are a new model and there will be lots of experimentation (this is a good thing because it implies innovation is happening). Whether or not the model will fail is open to question.

Clayton Christensen’s analysis of why they will fail however, is flawed and generally poor. Here’s why (keep in mind I have no data to back this up, this is simply my perception of what will happen from spending my life hanging out with technologists, entrepreneurs, and the people creating ACOs).

Christensen claims that we need physicians to change behavior and that the ACO model alone would not be enough to change physician behavior. I would argue that we would generally benefit from organizational change as well as physician behavior change. Either one would add value, both would add a lot of value.

Organization change


I am an early stage healthcare entrepreneur and also a venture capitalist. I have already seen the signs of change from inside Partners Healthcare here in Boston as well as group of community clinics in California who I have been working with over the past year. The reason for this change is that ACOs shrink the feedback cycle. In the old model of insurance (even under HMOs which were about capitated payment models), an insurance company had to decide what standard of care was best and THEN they had to incentivize that standard of care. Because they did not control the care delivery they were limited regarding what they could do to actually affect the care. Therefore, they would incentivize achievement of high level goals like managing a diabetics A1C, or the number of foot ulcer checks performed each year. This means an insurance company had to become convinced that lowering A1C was going to be valuable enough that it was worth paying for, and then they had to create a program to actually pay for that achievement. This feedback loop was years, even decades. We can see this in the slow roll out of things like the Diabetes Prevention Program.

Under ACOs the people who benefit from these changes are also the ones empowered to make them – this shortens the feedback loop of studying what works and deploying the beneficial changes of that work. Additionally, most ACOs are also integrated delivery networks which means that the organizations can deploy organization wide behavior change such as changing how patients are referred (this is actually one of things Christensen suggests we incentivize at a policy level toward the end of his article, what he doesnt understand is that this is exactly the kind of activity that an ACO does in fact enable and incentivize to exist).

Furthermore, we’ve started to see exactly the kind of inter-organization change that Christensen is looking for in the greater use of Minute Clinics. They recently started signing deals like crazy with ACOs to be an extension of the ACOs network. It is exactly this kind of behavior that he is asking for and it is the kind of thing that is more likely to happen with an ACO.

Physician behavior change

Because organizations are incentivized to change they will actually help drive physician behavior change as well. There are a number of tools currently being built that actually change physician payments in a hospital to be based on performance. This will help encourage more physicians to make use of new tools and evidenced based methods to actually improve the care on a patient by patient basis.

Furthermore, the Affordable Care Act’s partner in crime – the HITECH act incentives greater use of EMRs. This extra use is opening up a slew of new possibilities for the development of new evidenced based guidelines. This ultimately will generate better guidelines which will empower the physicians to be able to change behavior effectively. The use of ACOs and the need of those organizations to understand the best standards of care will drive them to do more research around effectiveness than was done in the past which will even further accelerate the development of evidenced based guidelines.

What is not fixed by ACOs

I think one of the biggest things that ACOs do not fix is the longevity of the patient relationship. It is possible that patients will stick with the same ACO for years, but it is unclear if ACOs make that any more likely than insurance companies would have. This means that investments in wellness which have a 10 year pay off are unlikely to be paid for (similarly to now). I dont, however, have a good suggestion of how to fix this without limiting choice – which i dont think is fair or a good thing for consumers. If you have any thoughts on this, please share!

Agree/disagree? Please share your thoughts.

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Elliot Cohen

Elliot is the founder of PillPack and the Hacking Medicine Conference at MIT. His specialties are cognitive science, C/C++, Java, Javascript, LISP, and PHP/Python/Ruby. More posts by Author