What is an Accountable Care Organization?

Generally speaking, an accountable care organization (ACO) is a group of coordinated health-care practitioners that use alternative payment models to reduce health-care costs. These models normally include capitation and other alternative methods of payment. In addition to using alternative payment models, an ACO also ties its reimbursement to quality metrics.

Physician group-led ACOs

During the past six years, physician group-led accountable care organizations (ACOs) have emerged as a dominant new entrant in the ACO market. In fact, more than half of all ACOs are now led by this type of provider group.

Physician groups have a unique set of characteristics that make them an ideal partner for an ACO. They have a lower cost structure, less overhead, and access to capital. These factors can be leveraged to help reduce risk and improve profitability.

ACOs may be integrated with other delivery systems such as nursing homes and home health agencies. They also have the potential to improve physician relationships within the network, standardize referral processes, and optimize call centers. Some ACOs even enter into total cost of care agreements with payers. These arrangements are likely to lead to increased utilization, which will improve profitability.

Despite their advantages, ACOs are not perfect. There are a few key areas where ACOs fall short. One major area is the lack of a meaningful benchmark. A pre-determined benchmark is not a good measure of an ACO's total cost of care. An ACO's benchmark should be set using trend data from similar providers.

ACOs may also suffer from "leakage." This is when patients receive care from multiple providers, often outside of the ACO's boundaries. This can cause significant costs for the ACO. An ACO can reduce leakage by 10 to 30 percent.

ACOs must enroll a large number of Medicare patients. Depending on the model, an ACO might be required to take on downside risk. This can be a compelling incentive to make care delivery changes, such as reducing leakage. However, it may discourage participation. The Trump administration is pushing ACOs to take on risk earlier.

An ACO may have to worry about high-margin services, such as post-acute care. They might also be concerned about their effectiveness in reducing patient referrals. An ACO may be required to establish a comprehensive governance structure around network integrity. These structures should be implemented with the aim of improving the overall quality of care for the network.

Hospital-led ACOs

Despite a wide range of literature on accountable care organizations (ACOs), there is not much consensus on whether they actually work or not. ACOs have been proposed to facilitate a shift from episodic reactive care to preventive and chronic disease management, which is important to achieve the "Triple-Aim" objectives of improving the quality of health care, reducing costs, and enhancing the patient experience.

Many hospitals and physicians are involved in ACOs, and studies have examined their impact. There are a number of factors associated with the success of hospital-led ACOs. In addition to financial integration, the authors identified three factors that are particularly important: interdisciplinary teams, buy-in from physicians, and participation in shared savings incentive programs.

Financial incentives may be a good way to optimize ACO impacts. However, they need to be strong enough to achieve the intended results. Moreover, hospitals are unlikely to benefit financially from ACOs if they think that doctors and hospitals are taking advantage of them.

In order to support ACO-like models, physicians' remuneration needs to be adjusted to ensure that they are adequately compensated. In addition, they need access to real-time data to improve performance.

The Center for Medicare and Medicaid Innovation is a new entity within the CMS, designed to promote innovation and coordination of care. It will pilot complementary initiatives and develop new rules for accountable care organizations. It is also expected to be responsible for developing quality performance targets and implementing a real-time data collection system.

Several studies have suggested that hospital-led ACOs have contributed to significant savings. They are part of the Medicare Shared Savings Program (MSSP), which is designed to transition Medicare from a fee-for-service payment model to a value-based payment model. The program expects ACOs to save $2.9 billion over ten years.

Some studies have found that receiving consistent primary care from an ACO for at least twelve months was associated with lower costs, reduced inpatient days, and readmission rates to discharging hospitals. This is likely a function of both decreased service utilization and better medication reconciliation. ACOs are also encouraged to use electronic tools to improve efficiency and to develop readmission risk processes.

Reimbursement ties to quality metrics

Increasingly, reimbursement dollars are tied to quality metrics in an accountable care organization. These payments are often called value-based payments, also known as capitated payments. They reward providers for delivering high-quality care while reducing waste. They also provide bonuses for reducing the total cost of care. These models are being used by public and private payers to reduce medical spending.

There is still much to be learned about the success of these new payment models. For example, how can the ACO model reduce health disparities? And how can the ACO payment structure motivate providers to make care delivery changes?

In order to understand the impact of ACOs on health care delivery, researchers analyzed the measures set used to gauge quality. They found that many of the measures were not in line with real life patient needs. Some were more relevant to treating specific chronic diseases, while others didn't have enough data to measure them. Moreover, the ACO models used to measure performance didn't necessarily align with clinical guidelines.

Using this information, researchers determined how to develop measures that would help an accountable care organization deliver higher quality care. They looked at the diagnostic and treatment goals for several conditions and identified the metrics to track those goals. Then they compared those goals with the measures included in the ACO quality metric sets.

The results suggest that the ACO model can improve population health, but it can also produce disparities. ACOs serving predominantly minority populations tend to perform worse on quality measures. In some cases, ACOs may not have the resources to address these disparities. And high upfront investments can discourage providers from participating.

For this reason, payers would like to see more ACOs take on downside risk. This can help spread financial responsibility more evenly, thereby making care delivery more accountable. However, this option can also encourage some providers to avoid participating in ACOs, because it is a risky business. Fortunately, there are ways to increase participation in these models.

The Centers for Medicare and Medicaid Services has recently announced plans to expand its ACO program. This would enable 500 ACOs to serve over 11 million Medicare beneficiaries by 2020.

Drawbacks of participating in an ACO

Despite the many advantages to participating in an Accountable Care Organization, there are also a number of drawbacks. These drawbacks can affect smaller practices, especially those who are considering entering into an ACO.

For example, when the Center for Medicare and Medicaid Services introduced its six-year ramp-up program, ACOs were encouraged to enter into downside risk arrangements. These contracts required that ACOs repay the CMS for any shared losses. However, downside-only ACOs were not eligible for shared savings payments.

Another drawback is that ACOs may have to pay penalties for failing to meet benchmarks. This can cause an ACO to severely impact their operating budget.

The upside of an ACO is that it can improve patient care and create financial rewards for physicians. An Accountable Care Organization (ACO) is a group of health providers that focuses on improving the quality and value of care. ACOs encourage voluntary participation. They also offer care coordination and better population health management. This can lead to millions of dollars in savings. ACOs are often federally backed.

Some drawbacks to an ACO involve health information exchange, which allows providers to exchange data and coordinate care. This can help reduce duplication of tests and improve treatment plans. ACOs must also develop data analytics capabilities to help manage patient populations.

One drawback of an ACO is that it requires a large investment of time, money, and effort to set up. ACOs may have to invest in additional hardware and software to support an electronic health record (EHR) system.

Another drawback is that ACOs aren't yet prepared for the financial risks that lie ahead. Some ACOs have already considered exiting their Medicare ACO environment under new risk rules.

In addition, there are concerns about referral restrictions. This can cause consternation when a practice is deciding between two directions. Some ACOs have found that their costs are much lower when they aren't forced to refer patients to other providers.

Lastly, some providers aren't enthusiastic about change. Some older doctors may opt to retire rather than move to an ACO. They may also find that the added bureaucracy can negatively affect their operations.