Leavitt ACO Report: Overstating or Understating Accountable Care Activity?

Accountable Care Organizations (ACOs) have been likened to:

A unicorn — a fantastic creature that is vested with mythical powers. But no one has actually seen one.

A camel — a horse designed by a committee, one that already has its nose in the tent

With this background, you can begin to appreciate the difficulty of conducting an accurate census of ACO animals in the wilderness.  Yet, this is exactly the task undertaken in the excellent Leavitt Partners report measuring ACO activity in the US.

As I will explain, the Leavitt report has the potential both to overestimate and underestimate ACO and accountable care-like activities. In my judgment, however, it’s far more likely to be understating just how much accountable care activity actually is going on.

Findings in the Leavitt Report

The Leavitt researchers “identified ACOs from news releases, media reports, trade groups, collaborations and interviews through the beginning of September 2011. Also included were entities that either self-identified as being an ACOs or specifically adopted the tenets of accountable care.”

The report counts 164 ACOs — 99 that are primarily sponsored by hospital systems, 38 by physician groups, and 27 by insurers.

Here’s how Leavitt summarized their results:

  1. Dispersion of accountable care organizations varies significantly by market.
  2. Certain regions of the United States are devoid of accountable care organizations.
  3. Hospitals and hospital systems are the primary backers of ACOs.
  4. Significant investment in the accountable care model exists independent of the Medicare Shared Savings Program.
  5. The success of different accountable care models is yet unproven.

You can listen to a 30 minute podcast interview with Leavitt researchers Andrew Croshaw and Thomas Merrill. The interview is skillfully conducted by Gregg Masters on blogtalkradio.

Are the Findings Accurate?

I’ve written before about the critical distinction between “accountable care” and ACOs — they’re not the same thing. If there is one suggestion I would offer the Leavitt researchers, it’s that the next census should better distinguish between formal ACOs and other accountable care-like (AC-Like) activities.

A formal ACO organization is a legal entity formed by care providers — it is incorporated, has a Board, holds meetings, is registered with the Secretary of State.

Informal, AC-Like initiatives can be created through contracts. The parties simply get together and agree to develop an initiative. They might choose to announce or not to announce their initiative publicly. Commercial payers are much more likely to be involved in AC-Like activities — in many cases even leading the charge.

How accurate is the Leavitt census of ACO activity? I can see that it has potential both to overstate and understate accountable care initiatives.

“Facade ACOs” — Potential to Overstate Activity

There is potential for the Leavitt report to be overstating ACO activity — where an ACO is identified and counted in the report, but really doesn’t have much funding or momentum behind it.

I can think of a number of scenarios where care providers might want to create a Facade ACO:

The ACO is a defensive tactic. “We understand that health care purchasers are really pushing for this accountable care thing … but we recognize that this model is not in our economic interests. We hope the urge goes away.  Our building an ACO is like building a nuclear bomb — we need to have it ‘just in case’ our enemies attack us, but God forbid that we ever have to use this thing.”

The ACO is a competitive response. “Our competitors have created an ACO. We need to show our Board and community that we are responding to this competitive threat.”

The ACO is underfunded. “While CMS estimated that it would take about $2 million to build out ACO infrastructure, the American Hospital Association has estimated that the actual amount ranges between $11 to $26 million. We like the idea of an ACO, we just don’t have the money to do it right.”

“Under the Radar” AC-Like Initiatives — Potential to Understate Activity

It is also possible that the Leavitt report understates the amount of AC-Like Initiatives, especially ones where payers are playing a significant role. Created by private contracts in closed conference rooms, these initiatives could be under the radar and not easily discoverable in a census.

I can also think of a number of other scenarios where AC-Like initiatives might not get counted in a census:

Avoiding antitrust scrutiny. “We are a powerful collection of hospitals and doctors in our community. We want to stay under the radar as long as possible so that we get more clarity about antitrust enforcement. We do not want to trip an investigation by the Feds.”

Gaining competitive advantage. “We don’t want our competitors to know what we’re up to.”

Pilots. “We like the ideas of dipping our toes in the water with ACO-like activities, but we don’t want to go through the cost and hassle of setting up a formal ACO organization yet. Let’s try some experiments and see how they go.”

What’s the Bottom Line? Overstating or Understating Accountable Care Activity?

Ultimately we don’t know, and I am very sympathetic to the methodological challenges the Leavitt researchers have had to deal with. Given these inherent challenges, the Leavitt report is a much needed and thorough first effort at an ACO census. The researchers also fully acknowledge the limitations of their research.

That said, in my judgment the report likely vastly understates ACO-like activity.


In the past year, I’ve seen commercial payers embrace AC-Like initiatives. A few years ago payers tentatively began accountable care experiments; in the last year most payers have embraced accountable care as a mainstream business strategy.

Even though commercial payers remain wary of provider consolidation through formal ACO organizations, they get the shift from Volume to Value that health care purchasers are demanding.

Vince Kuraitis JD, MBA, is a health care consultant and primary author of the e-CareManagement blog, where this post first appeared.

6 replies »

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  3. I was being somewhat pedantic, yet you answered very thoughtfully. I just happen to “one of those” who tend to think of patients as the ones who should be treated as the true purchaser, and that systems that treat them otherwise are doomed to fail.
    I agree that purchasers, as you defined them above, are starting to look for value over volume, but we have a long way to go in finding the right formula. I just hope (but tend to doubt) that the purchasers will hold off on widespread implementation until a workable formula is found that actually stands up to the test of real life application.

  4. Michael, thanks for your good words.

    Dr. Mike, let me try to clarify.

    The term “Volume to Value” is increasingly (but certainly not yet universally) being used as shorthand for the shift away from fee-for-service and toward accountable care payment and delivery approaches. For more elaboration, see e.g., http://www.healthinsight.org/Internal/assets/Payment_Reform/pdfs/Miller-From_Volume_to_Value-HealthAffairsSept2009.pdf

    Reasonable people could disagree whether we’ve turned the corner from Volume to Value. While personally I think the tide has shifted, the US healthcare non-system has proven very resistant to change.

    I can see that the term “purchasers” is ambiguous. I mean to refer to employers, government (Medicare and Medicaid), and health plans as purchasers. I agree that patients are not yet tuned in to accountable care payment and delivery, but I expect that patients will become more influential, too, as time passes.

    I also understand that this might not be occurring in your neck of the woods. As the Leavitt report documents, accountable-care like activity is concentrated in some regions and absent in many parts of the country.

  5. “Even though commercial payers remain wary of provider consolidation through formal ACO organizations, they get the shift from Volume to Value that health care purchasers are demanding.”

    Not sure I understand. The health care purchasers are the insurance companies. “They (insur. co.) get the shift …that health care purchasers (insur. co) are demanding” Doesn’t make sense

    You must mean the insured – i.e. the patient or consumer. But they aren’t purchasers in the traditional sense, at least not in my practice. They pay a small portion, but for the most part they pay their insurance company to disperse payments on their behalf. I still see my insured patients asking for volume. They certainly don’t understand the ACO concept, and they tend to worry when they suspect any sort of financial relationship between different providers of services. Value over volume could also refer to novel ways of providing care without requiring the traditional office visit, and there is some movement in this direction (not in my neck of the woods yet) but not sure that is truly part of the ACO concept and certainly is not dependent on it.