Commentary - Accountable Care Organizations and Narrow Network Insurance Plans.

Rapid medical care cost growth is one of the primary economic and fiscal challenges that policy makers wrestle with in the Unites States. Nationwide, medical expenses have grown at a rate approximately double the rate of inflation over the past two decades, in part due to price increases, in part due to quantity increases, and in part due to the introduction of new medical technologies. Medical care expenses have risen to approximately 20 percent of gross domestic product as of 2012, and it is projected that these expenses will cripple the state and federal budgets and slow economic growth in other sectors in the years to come. Accountable Care Organizations (ACOs) and insurer formation of narrow provider networks are two oft-discussed policies to reduce costs, with both having been implemented to some degree in practice. Participation in ACOs allows medical providers to work around the Stark laws and collaborate across the vertical chain of care, from primary care to specialty care to hospital care, and then allows these providers to collectively share savings if the population they treat is healthier and/or less expensive than some baseline level. Thus ACOs permit some level of integration between different medical providers, ostensibly to facilitate efficiencies arising from (a) care coordination, (b) technology adoption, and (c) population health management that might be hard to realize in the absence of some degree of integration. These greater efficiencies could lead to lower medical expenses (or lower growth in these expenses) at equal or higher care quality levels. However, while ACOs have some promise for providing more efficient care, they also have the possible downside of increased