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Can ACOs keep costs down, quality up?


Experts say Boeing Co.’s decision to invest in a comprehensive direct-to-employer accountable care organization strategy is an encouraging sign for the accountable care concept on the whole. But the company remains an outlier in the private sector, despite an increasingly concerted effort among provider groups to market themselves to employers.

Apart from Boeing and Intel Corp., which has established an ACO for its New Mexico employees, only a handful of other national employers have tested the waters of accountable care, largely with disease-specific contracts aimed at reining in costs and improving health outcomes for treatment of the most chronic conditions in a given employee population.

A number of factors are impeding a broader adoption of accountable care delivery models among employers, primarily the scarcity of evidence that ACOs can provide continual and significant cost savings without shortchanging employees’ health.

“The return-on-investment on these kinds of partnerships is still a bit unproven,” said Scott Rabin, a Los Angeles-based principal at Buck Consultants at Xerox. “There’s a lot of information out there about ACOs, but I think a lot of it is mostly intuitive.”

But that issue isn’t likely to persist, Mr. Rabin said, noting that some employers have disclosed some or all of accountable care’s positive early effects on their medical spending and workforce health.

One of the more comprehensive data sets on the efficacy of employer-sponsored ACOs comes from the California Public Employees Retirement System, which in 2010 began providing employee health care through an ACO partnership with health insurer Blue Shield of California Life & Health Insurance Co., the San Francisco-based hospital system Dignity Health and the San Ramon, California-based Hill Physicians Medical Group Inc.

Through the first four plan years, CalPERS’ net health care spending shrank by $95 million, according to a November 2014 report by the Pacific Business Group on Health and the nonprofit group Catalyst for Payment Reform.

The switch to an ACO-based reimbursement scheme with medical providers appeared to have cut unnecessary medical care, including a 15.4% reduction in the average length of employee hospital stays, a 16.2% drop in total inpatient days and a 17% decrease in emergency room visits.

“This isn’t for the faint of heart,” said Michael Taylor, a Boston-based senior vice president at Aon Hewitt. “You have to hang in there for, I’d say, a minimum of three years for this to have a chance of working.”

Another issue experts say is likely dampening employers’ desire to actively pursue contracts with ACOs is the administrative complexity those partnerships usually create for benefit managers.

Making matters worse, experts say, is a general shortage of third-party administrators with the capacity to manage the complexity of ACO partnerships for employers with large employee populations, particularly if — as is the case at Boeing and Intel — employees are split among two or more ACOs under the same plan.

For employers and health care providers eager to explore accountable care delivery, solving many of these issues could simply be a matter of patience and diligence, experts say.