ACO and HMO,A distinction with or with/out a difference -Are ACOs an example of Underware Gnome economics?

The current concept of an Accountable Care Organization (ACO) seems to have arisen at a 2006 meeting of MedPac and Dr. Elliot Fischer of the Dartmouth Atlas.See here for the 400 page transcript of the meeting.

A good place to begin an inquiry into HMOS v.ACOs is this entry by Jason Shafin,Phd Economics,on his blog Health-care Economics who discusses three difference between the two.

Dr. Robert Berenson,of the Urban Institute and of the Center for Studying Health System Change (HSC) and now a vice chair of the soon-to-be a very important player in health care ,namely the IPAB) co authored this article which is barely luke warm in its support of the ACOs and is even skeptical. See here for more on this center for HSC.

A later article he co-authored with two colleagues from the Center For Study of Health System Change went further and issued the warning that large vertically integrated organization such as ACOs can actually drive up health costs and offered the suggestion that price caps ( aka price controls) might be necessary.ACOs are, of course,said to be a means of increasing quality and decreasing costs at the same time.


A terse characterization of ACOs was offered by Dr. John Goodman in a comment to Dr. Shafin's above mentioned blog entry - " An HMO on steroids"

Two big issues with ACOs are market power and anti-trust concerns.So Far the FTC is still mulling over the rules of the game. See here.

I suggest a major difference between HMOS and ACOs is that the legal aspects of HMOs are well defined as are the regulatory rules while the rules for ACOS are yet to be written. There is so much uncertainty around almost every aspect of ACOs I am reminded of the South Park 's Underwear gnomes whose business plan is as follows:

Step 1.collect people's underwear
Step 2.???
Step 3.Make money

with ACO's business model being

Step 1.set up ACO
Step 2.???
Step 3.save money and increase quality of care

or perhaps

this version of the business plan of ACOs from WebMd is a more accurate description:

Step One: 'Provide connectivity and a full suite of services to the healthcare industry that improve administrative efficiencies and clinical effectiveness enabling high-quality patient care.'

Step Two:

Step Three: Profit.

Yes, step two is blank.