What is the role of competition within an ACO?

I am reading the last chapter of the book Accountable Care Organizations: Your Guide to Strategy, Design, and Implementation by Marc Bard and Mike Nugent. It is well worth the time and thought to read. It appears to me that if they work, ACOs are more likely to be successful in large urban areas where there are large populations of people and large numbers of hospitals and physician groups. The idea is to scale up "production" by designing efficient and effective care pathways. In an urban setting multiple ACOs can exist and as a result there can be a constructive combination of efficiencies within ACO networks and constructive competition among multiple ACO networks. Hospitals and physician groups can "shop around" and even participate in multiple ACOs within a large urban market.

But it is not apparent to me that this is going to work well in smaller markets that lack enough population base to support multiple ACOs. If there is only one existing local hospital and no large physician groups then it appears that there is only one potential "game in town." The challenge there will be the usual one of trying to align the interests of physicians with the interests of the hospital, given shrinking revenue from government payers. But what about the situation in which there are two or three local hospitals in a city and they have a long history of unhealthy forms of competition including frequent law suits? To create an ACO governance body composed of people with long-standing local institutional loyalties is going to be difficult. I am concerned that Medicare beneficiaries and others in such places may lack adequate care because in the absence of an ACO local institutions will not have adequate financial resources to provide quality care. If long-term competitors cannot get past their issues and competitive interests they may be unable to form an ACO in small to midsize places.

Just as Certificate-of-Need legislation led to accelerated spending for costly medical technologies in the 1970s it will not be surprising if the Patient Protection and Affordable Care Act will lead to many attempts by local hospitals to buy out other local hospitals and local physician practices. Coordination that may not be otherwise possible is possible under unified ownership. But there are still laws on the books that prevent some acquisitions and that make it illegal for the very entities that should be talking about forming ACOs from discussing financial matters because such conversations would be anti-competitive. What it boils down to is, do we believe in competition or do we believe in networks based upon cooperation, coordination and trust. It seems as if we want hospitals to compete with each other while at the same time being partners within ACO structures. How can the people who govern an ACO also fulfill their responsibilities to individual institutions engaged in competition with ACO partners?

One of the things that Bard and Nugent advocate for is tightly coupled systems. Can a system be both tightly coupled and internally competitive? Is it reasonble to insist on what amounts to consolidation of institutions while at the same time forbidding hospitals and others from engaging in behaviors that are illegal because they threaten competition?