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Accountable Care Organizations Are Increasingly Led by Physician Groups Rather Than Hospital Systems
David Muhlestein, PhD, JD; Tianna Tu, BA; and Carrie H. Colla, PhD
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Accountable Care Organizations Are Increasingly Led by Physician Groups Rather Than Hospital Systems

David Muhlestein, PhD, JD; Tianna Tu, BA; and Carrie H. Colla, PhD
Since 2015, the majority of new accountable care organizations (ACOs) have been led by physician groups rather than hospital systems. This shift requires policies that address the characteristic strengths and weaknesses of physician-led ACOs.
ABSTRACT

Because hospitals and health systems sponsored the majority of new accountable care organizations (ACOs) from 2010 to 2015, they influenced priorities and strategies of the policies designed to drive ACO adoption. In recent years, however, the majority of new ACOs have been sponsored by physician groups. This shift means that policies need to be developed with the characteristic strengths and weaknesses of physician-led ACOs in mind. Using data from the Leavitt Partners ACO database, we analyzed the types of providers becoming ACOs over time to look at their numbers and market potential. Because the market potential for further growth of physician group–led ACOs is much stronger than for hospital- or health system–led ACOs, policy makers need to create programs and policies that facilitate physician-led ACOs’ success by helping them develop the capacity to take on risk, finance investments in high-value healthcare, and partner with other organizations to provide the full spectrum of care.

Am J Manag Care. 2020;26(5):225-228. https://doi.org/10.37765/ajmc.2020.43154
Takeaway Points

New accountable care organizations (ACOs) are increasingly led by physician groups rather than hospital systems.
  • In 2018, physician group–led ACOs represented approximately 45% of all ACOs, hospital-led ACOs accounted for approximately 25%, and joint-led ACOs represented 30%.
  • There is greater market potential for new physician-led ACOs than for those led by hospital systems, so physician-led ACOs will likely be the dominant type of ACO in the future.
  • Because hospitals and health systems sponsored many early ACOs, policies, payment models, and care delivery models initially focused on building competencies for these groups. However, these policies and strategies may need to be reconsidered as the model moves forward.
From 2010 to 2015, hospitals or health systems sponsored the majority of new accountable care organizations (ACOs). This allowed them to influence the priorities and strategies of policy makers as they created regulations and polices designed to drive these organizations. However, in recent years, the ACO market has seen a shift in leadership as physician group organizations have begun to lead the majority of new ACOs (Figure 1). This trend, and the significantly higher market potential for physician groups, suggest that they will continue to lead a significant number of new ACOs. With this change, policy makers and practitioners must consider the unique needs and opportunities of physician groups in the transition to value-based care.

Background

ACOs consist of healthcare providers that accept responsibility for the cost and quality outcomes of a defined population. The defining characteristic of an ACO is the contract that establishes the provider group as being financially accountable for value. However, the type of care delivery changes that can be implemented to achieve ACO goals is determined by an ACO’s organizational structure.

In response to the policy environment, many early ACOs were large organizations that included hospitals, had prior experience with risk-based contracts, and had access to capital to invest in new technologies and start-up costs.1 For example, of the 10 participants in the Physician Group Practice Demonstration—the precursor to the Medicare Shared Savings Program (MSSP)—8 were hospital affiliated, 8 had experience with performance-based payment arrangements,1 and 8 had prior access to, or funding for, electronic health records (EHRs) and other information technology (IT) systems to track data. Because many early ACOs were hospital affiliated, policies, payment models, and care delivery models originally focused on building competencies for similar organizations. However, these policies and strategies may need to be reconsidered as the model moves forward.

Presently, ACOs range from large integrated delivery systems to hospitals with partner practices to multispecialty physician groups to small primary care physician groups.2,3 To understand changes in care delivery, it is important to understand the organizations participating, their characteristics and capabilities, and new participants attracted to these models. Our study reveals that physician groups—rather than hospitals or health systems—are becoming the dominant type of ACO and represent the largest potential type of organization to join the model. We use a simplified provider type to separate ACOs into 3 categories: hospital-led ACOs, physician group–led ACOs, and ACOs that are led by both a hospital and physician group. ACOs with hospitals are generally well financed, include an established health IT (HIT) infrastructure, and either have implemented or are experimenting with sophisticated data analytics systems.4,5 In contrast, average physician group ACOs tend to have less sophisticated HIT capabilities and data analytic tools6 and tend to be smaller, averaging a patient population of 20,000 lives, whereas ACOs with hospitals average 44,000 lives. ACOs across and within these groups have varying needs, competencies, and capabilities.

DATA AND METHODS

Data on ACO provider types were obtained from the Leavitt Partners ACO database, which tracks organizations that are participating in accountable care payment arrangements and includes information on organizational structure.7 Hospital affiliation or ownership by an ACO in the database has been previously validated through surveys.4 Determination of whether the ACO is physician, hospital, or jointly led is based on qualitative assessment of the broader organization, not just the providers participating in an ACO contract. For example, a health system consisting of hospitals and physicians may participate in the MSSP but may only list primary care physician practices on the official participant list. Because no hospitals are officially listed as participants, some evaluators would consider this “physician led,” but we consider this to be jointly led because the health system, including the hospitals, established and directs the ACO. Physician-led ACOs, then, should be viewed as organizations that are involved in ACOs that do not involve hospitals directly in the payment arrangement or in the broader organization. The data include all ACOs in the database with information on their provider type, which represented 1221 of 1334 ACOs as of the end of 2018. For this paper, we track only the year of their first contract and include organizations that subsequently dropped out of all ACO programs in the aggregate estimates. Estimates of total market size are derived from Torch Insight,8 a commercial healthcare data aggregator.

RESULTS

Figure 1 provides an overview of the types of providers that are becoming ACOs over time. The figure should be interpreted as the percentage of ACOs that fall into each category for each year. In 2010, 22% of ACOs were led by physician groups only, 63% of new ACOs were led by both a hospital system and a provider group, and 16% were led by hospital systems only; 79% of all ACOs in 2010 included a hospital in the ACO’s structure.

By 2016, the market changed, and 55% of new ACOs did not have a hospital participant. This continued into 2017, when 62% of all ACOs were physician group–led ACOs, although in 2018, only 45% were. The broader trend has been for the proportion of both hospital-led ACOs and joint hospital and physician group–led ACOs to decline.

In the aggregate in 2018, physician group–only ACOs represented approximately 45% of all ACOs, whereas hospital-led ACOs accounted for approximately 25% and joint-led ACOs represented 30%. This indicates that although physician-led ACOs represent the majority of new entrants, they are a minority of total ACOs, but they may become the dominant type of ACO in the country within the next few years if the trend of new entrants continues. A figure representing overall ACOs is available in the eAppendix (available at ajmc.com).

Estimating the market potential for ACOs is challenging, but we performed back-of-the-envelope calculations to get a sense for ACOs’ market penetration and potential. We first estimated that health systems or independent hospitals that included short-term acute care hospitals could potentially form an ACO and that physician groups with at least 15 providers could potentially form an ACO (based on the minimum number of physicians for the smallest ACOs). Ongoing consolidation could decrease this total market potential when larger groups or health systems combine, or it could increase this number as smaller physician groups merge to become large enough to enter into an accountable care contract. Also, some physician groups are owned by hospital systems, which may decrease the market potential for potential physician-led ACOs that do not include a hospital.9 We estimate that as of December 2018, 28% of existing health systems or independent hospitals were participating in an ACO of the more than 1700 hospitals or systems that could potentially form an ACO. In comparison, only 6% of the more than 8200 physician groups that are large enough to ultimately form an ACO have done so. Figure 2 depicts the market potential.


 
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