ACOs will require operational, cultural changes

The growing prominence of the accountable care organization (ACO) model offers many potential benefits, but it also comes with many potential hazards, according to a recent report from Marsh Risk Consulting, based in New York City.

The Marsh white paper on ACOs was authored by Donna Jennings, vice president of clinical healthcare consulting in Atlanta and Holly Meidl, U.S. leader of the healthcare practice in Nashville, TN.

In the long run, they say, an accountable care model can help participating healthcare organizations improve their reputations, gain market share, and create more sustainable cost structures. But transitioning to accountable care will require hospitals and others to make significant cultural and operational changes — starting with the way they view patient care.

“And hand in glove with such changes comes the identification and management of associated risks,” the report states. “Risk assessments can also help to guide future decisions made by ACOs and participating organizations about their insurance programs. As coordination of patient care is improved across ACOs, many key exposures should decrease; however, temporary increases in exposures should be expected during the transition period.”

Fortunately, many of these transition and ongoing ACO exposures can be addressed through a variety of existing insurance solutions. Directors and officers liability (D&O) insurance, which most healthcare organizations already buy, provides significant coverage for many of the risks that ACOs might face, including litigation filed by shareholders and others for any number of business decisions.

Jennings and Meidl note these other critical insurance options:

  • Managed care errors and omissions (E&O) insurance, which protects the health plan or network coordinator from claims brought by patients, competitors, and regulators. Many healthcare providers currently do not purchase such insurance coverage, but any organization that is forming or joining an ACO should consider purchasing it.
  • Provider excess loss insurance or provider stop loss insurance, which protects the financial stability of a healthcare provider by limiting its exposure to catastrophic individual health claims from services it has contracted to provide to managed care plan members.
  • Cyber/data privacy insurance, which provides coverage for data breaches, whether intentional or unintentional, including the cost of notification to affected individuals. Healthcare organizations have long been buyers of cyber insurance, and awareness has continued to rise through a spate of high-profile data breaches in the industry.
  • Medical professional liability insurance, or medical malpractice insurance, which provides coverage for claims of patient injury or harm as a result of a negligence by a physician or other medical professional. Many health care providers already purchase this insurance; others set aside reserves to draw upon in the event of a loss.

Healthcare organizations also should consider adapting their use of captive insurance companies, which are owned by the organizations themselves and offer several benefits, the Marsh report suggests. Traditionally, hospitals and others have used their captives to provide insurance to non-insured physicians. “Going forward, captives potentially could be used to provide insurance to network members that hospitals and others do not own, such as nursing homes or hospice facilities. Captives could also be used as a means to share financial risk associated with capitated payments across the network,” the report says. “Even if an organization already purchases these insurance products or has a captive, new accountable care models raise new questions.”

Jennings and Meidl suggest that risk managers ask these questions regarding any potential ACO relationship:

  • Does the existing D&O policy respond to wrongful acts from building networks, choosing care models, and negotiating payer contracts?
  • Does existing managed care E&O coverage address establishing a network of providers, managing patient care, and distributing shared payments?
  • Has a provider excess program been put in place to protect at-risk managed care contracts?
  • Does existing cyber/data privacy coverage address exposures for affiliated providers’ access to the same patient data sources? Do affiliates have their own insurance for this exposure?

“Underwriters have not yet reached the point of demanding to review individual contracts that insureds have with other network participants. But they have demonstrated a clear interest in ensuring that the organizations they are insuring have well-defined plans for the transition to accountable care,” the report says. “Risk managers would be well-served by engaging with their underwriters to explain their strategies and objectives for accountable care. Face-to-face meetings early in the transition process can help to eliminate many ambiguities and uncertainties and ease underwriters’ doubts.”

The free full Marsh report is available online at


  • Donna Jennings, Vice President, Clinical Healthcare Consulting, Marsh Risk Consulting, Atlanta. Telephone: (404) 539-8018. Email:
  • Holly Meidl, U.S. Leader, Healthcare Practice, Marsh, Nashville, TN. Telephone: (615) 340-2446. Email: