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Relative Performance of Provider Network Types

By June 20, 2019Commentary

The Accountable Care Organization concept has now been around for several years and has been promoted by several payers, including Medicare.  The idea was that providers could organize themselves into large networks offering comprehensive health services and these networks would have the resources to better coordinate care.  The ACOs were also intended to take financial risk in the interest of reducing overall spending.  In practice the ACO concept is a little nebulous and has several models.   A recent California report analyzes the performance of various types of organized health systems, including ACOs, HMOs and PPOs.    (Cal. Report)   The underlying data source is an “Atlas” that has data on 30 million insured Californians, including about 14 million receiving commercial coverage.  The report is based on 2017 data and compares the performance of traditional HMO plans, which tend to have a more limited network, preferred provider networks, which may cover most providers but with more cost-sharing for out-of-network ones, and ACOs, which generally only cover services from providers who are part of the ACO.

ACO market share was 11% in Northern California and 8% in Southern California, compared to 20% in Northern California for traditional HMO networks and 69% for PPO network designs, and 40% in Southern California for the HMOs and 52% for PPOs.  Across 8 quality measures, ACOs had a 66.7 score, HMOs a 65.6 one and PPOs a 57.4.  For total cost of care, ACOs averaged $4405 per person for the year, HMOs $4453 and PPOs, $4601.  HMOs had the lowest member cost-sharing, at an average $274 a year, while it was $483 for ACOs and $660 for PPOs.  All of these statistics were adjusted for member health status.  So it appears that ACOs were very comparable to HMO designs in quality measures and total health costs, and in the middle in member cost-sharing.  But the differences are fairly slight.  PPOs are popular because, whether they actually use it or not, members prefer the notion of expansive provider choice, and the results suggest they actually pay a pretty small price for that ability to choose.  HMOs and ACOs may have better cost control but the difference is not large enough to really push employers to force people into those designs.

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