ABCs of ACOs

Despite all the media coverage surrounding the Patient Protection and Affordable Care Act (PPACA) of 2010, there is still great confusion surrounding Medicare accountable care associations (ACOs). The ACO concept was created to improve patient outcomes, increase the quality of healthcare services and reduce healthcare costs. The Centers for Medicare and Medicaid Services (CMS) define the ACO model as a “group of providers willing and capable of accepting accountability for the total cost and quality of care for a defined population.” Depending on which side of the political aisle you reside, you might also refer to accountable care associations as Obama Care.

ACOs mandate that its providers deliver improved clinical outcomes and patient experience at a lower cost. Unlike the previous Health Maintenance Organization (HMO) model and preferred provider organizations (PPO) that offer pay-for-performance/fee-for-service plans for traditional visits, tests and procedures; ACOs tie provider reimbursements to quality metrics. They also require provider groups to create a reduction in the total cost of care for an assigned group of patients. The anticipated result is a “pay-for-value” plan.

Provider groups can include general practice, internal medicine, family medicine and geriatric medicine groups. Each ACO group includes a minimum of 5,000 covered patients and is defined by the number of providers and facilities required for inpatient and outpatient facilities, based on age-related statistics. Providers who form an ACO accept a degree of financial responsibility to improve care management and limit unnecessary expenditures while allowing those patients included in the ACO the freedom to choose their medical services. This freedom of choice is in direct response to previous HMOs that removed unhealthy patients from panels, preferring to “cherry pick” healthier patients.

Proponents view ACOs as the next evolution of patient care with an enhanced focus on patient safety and care by providing the right care at the right time at the right cost. Providers who are able to achieve the “holy grail” of lower costs and higher quality have the option to earn provider incentives or a share of the savings generated. So through the reduction of overall targeted healthcare costs it is possible to “bend the cost curve,” reducing healthcare costs over time.

It’s to be expected that an endeavor of this magnitude would include a need for increased transparency and a need for coordination and communication between the provider, patient and payer. Increased emphasis on clinical alignment relies on methods such as electronic medical records (EMRs) that allow the electronic sharing of data. This information exchange allows patients to compile a more complete medical record, minus a lengthy paper trail, and enables physicians and other healthcare providers to view patient records, procedures and tests housed in an electronic “cloud.” EMRs are also a way to eliminate waste created by redundant tests and procedures; and at some point should lead to establishing “best practices” based on the outcomes derived from this new cache of electronic information.

Opponents of ACOs criticize the organizations as an updated HMO model. These opponents contend that ACOs will increase costs if hospitals and healthcare systems are allowed to be the gatekeeper of the cost reduction. This stems from a belief that without outside competition there is less incentive to reduce costs, causing healthcare to become more expensive for everyone.

Since 2010 there have been many organizations, businesses and state governments who have questioned the constitutionality of ACO and their capability to provide the key elements necessary in the provision or management of the continuum of care, comprehensive performance measurement and internal distribution of shared savings payments. As suggested by the continuing legislative debate raging on the state and national levels, both sides remain far from compromise, but for the immediate future, the ACO model will remain very much a part of the U.S. healthcare environment.

Core Principles of ACOs

  1. Provider-led organizations with a strong base of primary care that are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients
  2. Payments linked to quality improvements that reduce overall costs
  3. Reliable and progressively more sophisticated performance measurement to support improvement and provide confidence that savings are achieved through improvements in care

— David C. Ayers, CEO, U.S. Operations of Nueterra

Posted in Expert Opinions.