An exploratory study of the growth of the Accountable Care Organization and its impact on physician groups’ profit: a complex adaptive system approach

Abstract

The emergence of Accountable Care Organizations (ACOs) in the landscape of the U.S. healthcare system marks a paradigm shift in healthcare operations. The potential impact of ACOs has been a topic of intense debate. Traditional analytical approaches do not lend themselves to examining the complex phenomenon of the emergence and growth of ACOs in the healthcare network. We adopt a complex adaptive system lens to examine the growth of ACOs among physician groups and explore factors that influence this growth. We also discuss the impact of ACOs on the profit of physician groups. An agent-based model was built to simulate physician groups' ACO entrance and exit based on a set of simple rules and their complex interactions with other agents. Based on the simulation results, we derive patterns of ACO expansion and contraction, following four stages of wait-and-see, rollercoaster, fast growth, and stabilizing. Findings suggest that the growth of ACOs is sensitive to the initial state of ACO membership. When the initial size of ACO membership increases, it helps to eliminate the rollercoaster stage. In addition, the growth of the ACO varies depending on the cost–quality tradeoff. When both cost and quality objectives can be met simultaneously, the growth of ACO membership follows wait-and-see and fast growth stages followed by a different stage that we term sticky state. The impact of ACOs on physician groups’ cumulative profit varies by the service quality level of the physician group. Physician groups affiliated with insurance companies charging the lowest or the highest level of health insurance premiums are worse off with the ACO option. However, the ACO benefits physician groups affiliated with an insurance company charging a moderate level of premiums.