ACOs and the New New Thing in Healthcare: Two Great Tastes that Taste Great Together

by Mike Miesen

“Will Accountable Care Organizations (ACOs) work?”

That question has been thrown around for years, serving as fodder for Twitter-fights, myriad health care blog posts, and hours of beer-soaked barroom debates (if you’re shameless as I am). Adding to the discussion are Clayton Christensen, Jeffrey Flier, and Vineeta Vijayaraghavan (or CFV, as I’ll refer to them), of Harvard Business School, Harvard Medical School, and Innosight fame, respectively.

In a recent Wall Street Journal article, they answer the question with a resounding “No.” But, in doing so, they treat ACOs and other health care delivery mechanisms – part of what I’ll call the “New New Thing in Health Care” – as mutually exclusive, rather than as what they are: two great tastes that taste great together. Contra CFV, ACOs may help spur the exact disruptive innovation in health care that Christensen is known for discussing.

Before getting to their argument, a short catch-up: The term “Accountable Care Organization” is just wonk-speak for a group of health care organizations – from primary care practices to acute care hospitals and nursing homes – that choose to jointly care for a specified patient population. According to the Affordable Care Act, if the ACO is able to provide quality care at a lower price than what Medicare would have paid for the same people, the ACO gets to share in some of the savings (sidenote: It gets way wonkier, but this post isn’t about the specifics of ACOs – for the best overview and commentary I’ve seen, read our friends at The Incidental Economist).

First, CFV highlight three criticisms of ACOs: they won’t change physician behavior enough; they don’t provide the incentives necessary to significantly modify patient behavior; and anyway, even if they do modify these behaviors, they won’t save much money. A full-throated defense of ACOs is outside this post’s purview, so I’ll only note that the authors appear to judge ACOs only in the short-term and aren’t playing the long game; the ACO of today will probably not be the ACO of ten years from now – and the same can be said for physicians and patients.

Instead of placing faith in ACOs to reduce health care costs in a meaningful way, they argue for increased use of lower-cost clinical settings (such as MinuteClinics); regulatory changes that expand the scope of practice for non-physician clinicians and generalist physicians; and the adoption of telehealth and other platforms/devices that enable “automated hovering.”

These are all excellent ideas; let’s promote them (which this blog has done herehere, and here) and see to it that they play their part in reducing the growth of health care costs in America!

But drawing a red line between ACOs and The New New Thing in Health Care limits the set of available options in an unnecessarily constricting way. None of their suggestions are mutually exclusive with ACOs; quite the opposite, actually – there’s a strong case to be made that ACOs provide substantial incentives for the adoption of cheaper primary care, the growth of nascent technologies, and the relaxation of rent-seeking regulations (though the last one is unlikely to change regardless).

Exhibit A: Walgreens, which runs 350 TakeCare Clinics, is a partner in three ACOs! In a quote tailor-made for this, a Walgreens senior VP says, “we are integrating [our] clinical services with hospital clinical services… The Walgreens clinicians are essentially now a part of the… care team.” Which is exactly what we want, right? The ACO will have a financial incentive to advocate that its patients go to a TakeCare Clinic for simple primary care issues, which will lead to increased use; increasing the continuity of care for a patient could significantly improve health management of the population – which is expected to reduce health care costs across the board. So far, this is exactly the end result that CVF is hoping for.

Nothing is holding back ACOs from investing in telehealth and other applications that increase patient engagement in their plan of care. If a WalMart kiosk, pill bottle or social network is shown to increase patient engagement – and thus, in theory, reduce health care costs – why would the ACO not offer it to patients? The potential return on investment for such a thing could be higher in an ACO environment than in other arrangements, owing to the shared savings model; ACOs could very well accelerate the use of new technology meant to improve health and wellness.

Finally, let’s be honest: with or without ACOs, scope of practice regulations are unlikely to change – rent-seeking is a serious problem in American health care, as in other sectors. But ACOs may make regulatory changes slightly more palatable, as some lost income will be returned in the form of shared savings. Either way, I wouldn’t get your hopes up.

As I’ve previously written, the Millennial generation is primed to consume health care services in different ways than previous generations, and is uniquely qualified to use existing and nascent technologies to do so. Eventually, as ACO-like schemes propagate in the private sector, the most inventive of them will figure out how to address our needs using retail clinics, automated hovering, and other means, keeping us – and their profit margins – healthy.

All of which is to say: no one really knows the answer to the ACO question, though it seems that it’s possible that ACOs can be the scaffolding around which other measures can be constructed. And CFV are absolutely right that their recommendations – The New New Thing in Healthcare – can be uniquely transformative, though it seems that they can do so in an ACO-rich environment, too.

Who knows – they may even be better for it.


Mike is a healthcare consultant currently on loan to the Ugandan Ministry of Health (through a NGO), leading a project to reduce maternal mortality. Follow him on Twitter @MikeMiesen or subscribe to the blog.


One thought on “ACOs and the New New Thing in Healthcare: Two Great Tastes that Taste Great Together

  1. alsanblog says:

    Of course, ACOs are mostly a retread of the old HMOs from the 1980s and 1990s that nobody liked because they didn’t provide enough “choice” and sometimes dealt harshly with coverage issues. ACOs might very well generate efficiencies, but unless the markets in which they operate are competitive, cost savings will not be passed along to consumers. Yet nobody seems to be focusing on the competition aspect of the issue as healthcare organizations continue to consolidate. My post on an Einer Elhauge article touches on the issue (see

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