Reform Update: Lack of network restrictions source of trouble for some ACOs

As more hospitals and physicians have money on the line for healthcare quality and cost, their attempts to control costs have grown more intense and ambitious. This would be good news if the path to more effective and less costly care were clear, but it's not. That has transformed many of the nation's health systems into high-stakes laboratories where theories on how to deliver the best value care are underway.

One approach is accountable care, which is being tested by more than 200 organizations and Medicare under the Patient Protection and Affordable Care Act and by private insurers. Accountable care puts money at stake for providers to deliver care to a group of patients that meets quality and cost targets.

But accountable care organizations have met with several challenges. One is that many patients seek care outside the ACO network from providers with no financial interest in meeting the ACO's cost and quality targets. The patients seemingly do not know or care which hospitals and doctors are part of the ACO network and don't understand why it's supposed to be in their best interest to stay in network.

In Medicare ACOs, patients can see any doctor they please with no extra out-of-pocket costs. This freedom contributed to the decision by Presbyterian Healthcare Services to drop out of the Medicare Pioneer ACO program after one year.

Jim Hinton, Presbyterian's president and CEO, said the Albuquerque-based system would have more success controlling cost and quality under managed care, which limits patients' network of providers and imposes additional cost-sharing if they go out of network. Limited, or narrow, networks also have gained interest among private-sector ACO arrangements.

But not everyone agrees. AtlantiCare in Egg Harbor Township, N.J., has no plans to restrict patients in accountable care arrangements to a narrow network. The health system has three ACO contracts, including one with Medicare.

Instead, AtlantiCare will arm primary-care physicians—whom patients trust for referrals—with data about specialists' quality performance and cost of care, said Steven Blumberg, the senior vice president and executive director of AtlantiCare Health Solutions, the system's ACO. “That way we're not being paternalistic,” he said.

But this approach is untested. Data are not yet available, he said. But Blumberg said well-informed primary-care doctors could do much to steer patients toward high-quality, more efficient specialists no matter how broad the network.

“We think most patients view their network through the eyes of their primary” care doctor,” he said. “That's a theory.”

Some healthcare reform approaches that seek to remedy the costly fragmentation in U.S. healthcare delivery may drive up prices, two economists argued in the New England Journal of Medicine. Policies to promote coordinate could also increase providers' market power with rising prices as a result, said Katherine Baicker, a health economics professor at Harvard University and Helen Levy, a research associate professor at the University of Michigan. “Coordinated systems may thus deliver the right care to the right patient at the right time, but at the wrong price,” they said.

SSM Health Care became one of the latest health systems to expand its health insurance assets. The St. Louis-based health system acquired Dean Health System in a transaction that increased SSM Health Care's ownership of the Dean Health Plan from 50% to full owner, Modern Healthcare's Rachel Landen reported.

Follow Melanie Evans on Twitter: @MHmevans