Accountable Care Organizations in the United States: market and demographic factors associated with formation.

Implementation of the Affordable Care Act is no longer in doubt after the Supreme Court's June 2012 decision to largely uphold the Act and the 2012 elections. Delivery and payment system reforms included in the Act are proceeding, including implementation of accountable care organizations (Berwick and Hackbarth 2012). An accountable care organization (ACO) is a group of providers collectively held responsible for the overall cost and quality of care for a defined patient population. These and other value-based payment reforms are intended to address long-standing problems confronting U.S. health care: uneven quality, unsustainable costs, and care that is fragmented (Fisher et al. 2007; Fisher and Shortell 2010; Casalino and Shortell 2011; Fisher, McClellan, and Safran 2011). ACO implementation began in earnest in 2012: Medicare began the Pioneer ACO program and the Medicare Shared Savings Program to contract with ACOs (Berwick 2011), many organizations began commercial payer ACO contracts (Larson et al. 2012), and several states began negotiating or implementing ACO contracts under Medicaid programs (McGinnis and Small 2012). At this early stage of development, it is not known whether ACOs will be successful in spurring system-wide transformation of U.S. health care. Early evidence from Medicare's Physician Group Practice Demonstration and a similar commercial contract suggests that the model holds promise (Weeks et al. 2010; Song et al. 2011, 2012; Colla et al. 2012). However, many have raised concerns about the likelihood the ACO model will achieve its aims (Burns and Pauly 2012; Eddy and Shah 2012) and the potential for raised prices as providers consolidate to form ACOs (Berenson, Ginsburg, and Kemper 2010; Berenson et al. 2012; Scheffler, Shortell, and Wilensky 2012). In addition, there are concerns about the high cost and technical difficulty of establishing ACOs, including the work necessary to negotiate or apply for an ACO contract and the investment required to reorganize and redesign care (Pollack and Armstrong 2011; Burns and Pauly 2012; Evans 2012; Lewis et al. 2012). Thus, it is not certain whether a substantial number of provider organizations will undertake accountable care. Most important, nothing is known about the characteristics of the health care markets or local areas where ACOs are being implemented. Research has documented that diffusion of ACO precursors, such as managed care or health maintenance organizations (HMOs) and pay-for-performance, is uneven across local areas (Baker 1999; Rosenthal et al. 2006); thus, it is likely that ACO formation will also be uneven, particularly in the early phases of ACO development. In this article, we examine how many ACOs were established in the United States as of August 2012; where those ACOs are located; and what types of American communities are more or less likely to be served by an ACO. Our results indicate that over 55 percent of Americans reside in local areas where at least one ACO has a presence. We use information on demographic and health-system characteristics to identify factors associated with the local formation of ACOs. Our findings confirm concerns that the current ACO model may face barriers to implementation in many regions.