Why ACOs will succeed

7:44 am by | 5 Comments

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

By 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.
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The big issue Christensen addresses which you haven't really touched on is patient behavior.   Lack of compliance or follow-through is a costly problem, and while it might not be the patient's fault if it's hard for them to obtain appointments or care efficiently, outcomes depend both on provider and patient behavior.  Also, from the patient perspective, premium payments are a lot like monthly gym fees; no one is punishing you for not using services you paid for, and for the most part, they prefer that you don't.  In college, I defrayed the cost of my loans through work-study programs.  If ACOs offered similar payment incentives to patients by defraying more than a measly $150/year for gym memberships, but instead through true wellness maintenance, we wouldn't seek health "care" only when sick, and the system would in effect become less sick.



As a primary care MD , I will continue to do long term preventive care because just like when I did them yesterday it's the Right Thing to do. As a member of the primary care MD owned ACO I will work to get those things covered because they should be. I still believe if I do the best I am able to do, I will be financially rewarded as well. Obviously the system hasn't worked like that for me lately, but I feel putting authority back with responsibility will correct most of the problems with quality but still may cost more after an original significant dip over the next 3-4 years.

Trippe. Sent from my iPad

Dr Ross
Dr Ross

ACO's will fail, if we measure success as widespread adoption with financial stability. ACO's will succeed if we measure events seen at Partners, Kaiser or Geisinger.   The sad truth is that doctors are signing up for ACO's, cashing the check up front, and hoping to figure out a solution on the fly.  The integration of cooperative provider networks who are eager to be measured, systems which provide accurate measurement and tracking of patient care events, clinical outcomes, adoption of locally available best practices (which may in fact vary by region), health economic outcomes, patient satisfaction, and delivery models/systems which are free of the high cost strangle hold maintained by expensive, FFS-addicted and consolidating hospitals, is HARD work.  The evidence shows that the costs of care overall are increasing as hospitals and payers possess enormous power and political influence.  Physicians who join hospitals are subject to salary incentives per RVU.  Physicians remaining independent, remain hooked on the fee for service payment approach.  Either way, patients suffer.    As CMS reduces reimbursement, doctors "see" more patients in less time.  I agree with Christensen that innovation will happen, and is already happening, on the fringes.  How we organize this activity into patient centered solutions which the doctors will adopt and the regulators can swallow (big gulp!), will determine the the happy future of health care.  In the interim, hospitals will organize, control their markets, and patients will be treated like cattle in largely unsafe institutions.


Regarding what is not solved by ACOs -- you're right on, but overestimate the length of time required to realize a return in many of these proactive, population health based models. Many costly conditions respond to wellness approaches in a matter of months, saving providers, payors and employers money. This same phenomenon also assures that ACOs will focus first on the highest value models that assure a return, not just the easiest or the ones tied directly to readmission penalties. 

Note that we'll see many variations on the ACO, whether they operate under that moniker or not. States and health systems are facing swelling Medicaid enrollment and must address these populations using similar models to assess risk and deliver care in the community that simultaneously improves outcomes and reduces overall costs. 


"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…"