Since 2010, interest in the Accountable Care Organization (ACO) model has grown considerably. ACOs have developed and proliferated in part as the result of intentional government policy, both from the Centers for Medicare and Medicaid Services and the Affordable Care Act. In turn, this has stimulated growth in the commercial sector.According to Leavitt Partners, there are now over 300 payers with commercial ACO contracts, which cover more than 12 million lives nationwide. California alone now has 67 commercial ACOs, which cover over one million lives statewide. Commercial ACOs have the potential to improve healthcare quality and patient outcomes while achieving cost savings. However, they may also present risks—including those related to solvency and anticompetitive pricing—to providers, patients, and payers.Aiming to inform states’ roles in this fast-growing market, Part 1 of this report investigates how state governments may promote the responsible development of commercial ACOs. We first describe actions taken by state governments to realize varying policy goals. These goals are:1. Support and Encourage Integrated Care2. Support Alternative Payment Methodologies3. Support Strong Networks of Primary Care4. Protect the Public from Anticompetitive Behavior5. Ensure Providers Responsibly Assume Risk6. Develop and Support Comprehensive Databases7. Encourage Public Reporting of Cost and Quality Performance DataWe then use a case study approach to present a variety of policy tools that state regulators and antitrust enforcers are using to achieve these goals. We focus on four states with significant development in this area: Rhode Island, New York, Massachusetts, and Texas. Dividing these tools into those that aim to regulate providers and those that aim to regulate payers, we identify:Tools that regulate providers1. Risk Certificates2. Certificates of Authority or Licensing3. Antitrust Enforcement4. Antitrust Exemptions5. Restrictions on the Range of Permissible Contracts6. Support and FundingTools that regulate payers7. Cost Caps and Benchmarks8. Population-Based Contracting Targets9. Primary Care and Primary Care Medical Homes Targets10. Targets for Alternative PaymentsWe map these tools onto the policy goals identified earlier by state. A summary of this analysis appears in Table A, "State Actions to Promote and Restrain Commercial Accountable Care Organizations" (see report). In Part 2 of this report, we consider whether California, a large state that has witnessed a remarkable proliferation of ACOs, should take additional actions to promote or restrain these organizations. In particular, drawing from lessons learned in Part 1, we compare California’s actions in this area to those taken by the four case study states. To a policy-oriented audience, we provide guidance on three potential actions: certificates of authority, antitrust enforcement and exemptions, and risk certificates. While this section focuses on California, the implications of our analysis go beyond California, given the proliferation of ACOs across the United States.Throughout this report, we discuss potential tradeoffs inherent in these policy goals. For example, financial and clinical integration may promote better quality or cost-effective healthcare, but also may present risks of anticompetitive behavior. States must consider and balance these goals when pursuing state action around ACOs. We conclude with a discussion of these tradeoffs and in the context of the state tools included in this report
