Accountable Care Organisations

In 2017, as outlined in our page on the background of integrated or accountable care, NHSE required the  44 local health systems (‘footprints’) it had set up across England to morph into Sustainability and Transformation Partnerships, which were then expected to evolve into Accountable Care Systems (ACSs). These, in turn, may become more complex Accountable Care Organisations (ACOs) over time.

The terms ACO and ACS are often used interchangeably but there is a difference. Both are radical new ways of delivering NHS systems that increase the involvement of the private sector. But an ACO differs from an ACS in that it can either be a new or existing organisation with a single contract for providing an agreed bundle of services. It takes full responsibility for deciding how to allocate resources and design care for its local population, including decisions on changing where or how services are delivered.

ACOs can have different structures. For example

  • a single organisation that acts as a prime contractor or ‘integrator’ that is awarded a single contract to provide a bundle of services which it may then sub-contract out to other providers. The prime contractor may or may not enter into a joint arrangement with the sub-contracted providers to share the risk and benefits of meeting the contract. Alternatively,
  • A provider (or group of providers) form a new corporate vehicle (a ‘Special Purchase Vehicle‘) that holds the contract for delivering services. The SPV is a legal entity, typically set up by a major investment bank or insurance company that can allow the risks faced by providers to be separated out and taken on by investors looking for new opportunities to make money. (See our page on the Private Finance Initiative to see how SPVs have been central to financing new NHS hospital buildings and facilities, and the massive debt that many NHS Trusts now carry as a result.)

The service providers within an ACO work together over a set period (such as 10 years) to take responsibility for the cost and quality of a specified range of health and possibly social care services for a defined population – potentially all those living within one of NHSE’s 44 ‘footprints’ –  and for a fixed sum (a ‘whole population budget’).

NHSE’s first reference to Accountable Care Organisations came in its Five Year Forward View (5YFV), where it proposed to introduce new models of care, such as ‘Multispecialty Community Provider’ (MCP) and ‘Primary and Acute Care Systems’ (PACS). These, it said, would be similar to the accountable care organisations found, for example, in the US, where the results are mixed, or in Spain where the Alzira model had been developed.

Example: The Alzira model

The Alzira model is a form of public-private investment partnership (PPIP). PPIP is similar in some ways to the infamous Private Finance Initiative (PFI) where the private sector finances and constructs healthcare infrastructure, such as a new hospital, and manages and maintains that infrastructure throughout a specified, renewable contract period. But PPIP differs from PFI in that the private sector is additionally responsible for the delivery of all health services – curative, preventive, and diagnostic – that take place in the newly built or renovated facilities. This may be in addition to responsibility for the supply of non- clinical support services—such as medical transport, human resources, and facilities management. The private partner involved generally forms a consortium and may sub-contract some of these services.

The Alzira version of PPIP is named after the town in Valencia, Spain, where the model was first introduced  in 1999. Spain operates a federal system of government, with each autonomous community having complete authority regarding healthcare issues. The initial success of the Alzira initiative led to the establishment of new PPIPs in four other health districts in Valencia, and a similar model being implemented by the regional government of Madrid, most with the company Ribera Salud as their parent. It has to be said that not all were successful.

The  original Alzira initiative represents the first time that the private sector in Spain could enter into contracts to self-manage hospitals: it’s based on a partnership between the regional government of Valencia and UTE Ribera.  UTE Ribera is a consortium of a private health insurance company, banks and construction firms. The Valencia government granted this consortium a 15 year ‘management concession’ to provide primary and specialist health care, integrated with the existing Spanish NHS. The contract was to design and build a new 300 bed hospital and operate a district network comprised of the hospital plus four integrated health centres and 46 primary care centres. This included delivering clinical and non-clinical services for  the 250,000 residents of the Alzira district as well as some out-of-district patients.

A central feature of this model was a ‘payment by capitation’ system. Under the contract, the government of Valencia paid UTE Ribera an annually adjusted fee for each resident for the duration of the contract. This figure had to cover all the expenses needed to provide the service, including payroll, drugs and other medical consumables, utilities, depreciation of assets and the cost of loans. Research suggests that this system has built-in ‘perverse’ incentives, such as encouraging managers to ‘cherry pick’ the most lucrative specialities or to  choose less expensive treatments (such as the prescription of medicines rather than admission to hospital) that may not be in patients’ interest.

Hospital doctors and many GPs working within the Alzira model were employed by the operating company rather than the public sector or civil service as is usual in Spain’s public hospitals. Generally, in Spain, private sector contracts of employment have worse terms and conditions, including less job security, lower pay scales and longer working hours, meaning increases in productivity of around 20 – 30% over the public sector. In Alzira, medical salaries had a fixed component (80%) and a variable component dependant, for example, on how staff responded to certain incentives: the unified information system for sharing patients’ data and that made patient costs visible to clinicians allowed individual clinicians’ work to be checked. UTE Ribera profits were capped at 7.5%.

Notably,  in June 2017 the new coalition government in Valencia passed new legislation to return the Alzira health concession to direct public management. At around the same time, a main player involved in the Alzira PPIP – the Ribera Salud Group – came under police investigation for embezzlement and corruption. In Madrid, following mass health workers’ strikes and other difficulties, the  regional government has abandoned its plan to use the Alzira system for six public hospitals. (Ribera Salud is now forming a partnership with Northumbria Foundation Group Hospital in the UK.)

While some features of the Alzira model would be welcome in the UK’s NHS, such as better integration of care, there are concerns about importing the model wholesale. For example, it could transfer significant power from NHS service commissioners (usually Clinical Commissioning Groups or CCGs) to private providers: the Alzira model requires commissioners to take quite a different approach to their role, using contracts to state the outcomes they want but giving little detail and direction about how to do this. There is also some anxiety about the closeness between the contract holder and their suppliers in the Alzira model, which could mean less rigorous oversight of sub-contractors. In addition, this model could squeeze out some types of providers with, for example, dire consequences for social enterprises and charitable providers.

Models like Alzira are promoted largely on the grounds that they reduce costs yet maintain quality. Yet research shows that while there is some evidence that the Alzira project in Spain delivered cheaper health care, due to the specific circumstances under which it operated in Spain, these savings are unlikely to be achieved internationally. In addition, once these organisations become operational, analysis shows there is a lack of public accountability, with the possibilities for monitoring limited by the terms of the contract. The same analysis also suggests it’s hard to learn from the experience of other nations’ health systems because of different institutional factors. This means that it can’t be assumed that claims made about the Alzira model of lowered costs while maintaining quality can be taken at face value.

See also our pages on ‘Accountable Care Systems‘ and ‘Implications of accountable care


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