Traditional health care delivery systems pay individual doctors and hospitals for each service they provide. Recently, however, a new way of delivering and financing health care is gaining ground. Accountable Care Organizations, known as ACOs, offer an alternative to traditional systems that adversaries say create incentives for excessive, duplicate and conflicting treatments. In contrast, ACOs are designed to promote coordination of services. They reward providers when high quality care is delivered at a reduced cost by paying them part of the monies saved. Instead of the traditional fee-for-service model, ACOs rely on newer reimbursement methods such as bundled payments, medical homes, gain sharing and pay for performance. Also, in the typical ACO model, physician providers are employed by the hospital or health care organization.
The ACO concept was formulated four years ago by Elliot Fisher, MD, of the Dartmouth Institute for Health Policy and Clinical Practice and Glenn Hackbarth of the Medicare Payment Advisory Commission. It gathered momentum among policy makers and emerged as part of the health care reform law enacted last spring.
The law focuses on a specific ACO model to provide care for Medicare patients. It may be adopted on a three-year, voluntary basis beginning no later than January 2012. The original House bill called for the Centers for Medicare and Medicaid to establish a pilot program that would evaluate a number of differing ACO-type systems. However, the Senate version, which was the one enacted into law as the Affordable Care Act last March, outlines one model that is a bonafide part of Medicare, rather than merely a pilot. Basic features of this model include:
Invisible enrollment: Patients may be assigned to ACOs without their knowledge. This would allow payers to establish a group for which the ACO would be held accountable. Critics believe, however, that patients should have some choice about becoming part of an arrangement that rewards providers for reducing services.
Performance measurement: Payers collect data pertaining to the ACO group's service utilization, cost and health, and will compare this information to the general population. Providers may be required to meet minimum quality standards in order to continue their ACO status.
Shared savings: Costs for ACO patients will be compared to targets based on previous experience with those patients or similar non-ACO patients in the community. If the ACO delivers care at a lower cost, providers will receive a share of the savings. Initially, there will be no risk to ACO providers as they will not share in losses if costs run higher than expected; however, this may change over time.
Although current discussions tend to apply the ACO concept to Medicare, there is interest in broadening the system to include patients covered by Medicaid and private insurance. Proponents of this expansion maintain that the program will be most effective when providers are able to implement system-wide, rather than piecemeal procedures.
Most health care policy analysts concede that the ACO system is not without its challenges. For example, hospitals and health care providers make money by maximizing service volume and may not consider potential shared savings sufficient to offset revenue losses. Also, small physician groups and sole practitioners may not have the data systems necessary to participate in ACOs. Finally, current antitrust laws and Medicare restrictions prohibit many kinds of financial relationships among providers. Although the health reform allows the Centers for Medicare and Medicaid Services to waive some of these regulations, there is concern that a few highly integrated systems might consume a large share of the market. This would enable them to increase their bargaining power with private payers, reducing the potential for savings.
Health care analysts believe that ACOs will evolve as experience is accrued. In the meantime, get ready for continuing discussion and interest in this emerging concept.
