Accountable Care Organizations: Right for Your Practice?

For consumers, passage of the Patient Protection and Affordable Care Act potentially means new access to healthcare services that may not have been previously available. For providers, implementation of this law requires creativity and efficiency in delivering those new services so that they can temper rising healthcare costs while still providing patients with the top-notch care that they need.

For consumers, passage of the Patient Protection and Affordable Care Act potentially means new access to healthcare services that may not have been previously available. For providers, implementation of this law requires creativity and efficiency in delivering those new services so that they can temper rising healthcare costs while still providing patients with the top-notch care that they need.

One major strategy that can prove beneficial to patients and providers alike is coordinated care. The federal Agency for Healthcare Research and Quality (AHRQ) defines this as the “deliberate organization of patient care activities between two or more participants (including the patient) involved in a patient’s care to facilitate the appropriate delivery of healthcare service.” This entails two goals: the transfer of information - medical history, test results, patient preferences and so on - between one individual involved in a patient’s care to another and the establishment of accountability for patient care through the designation of specific responsibilities to individual providers.

Although coordinated care can benefit everyone, its true value becomes apparent when we discuss patients who have complex medical needs, such as multiple chronic diseases that require multiple physicians and several medications. A coordinated care model that creates organization around patients at the individual level is likely to share information among different specialists and improve continuity of care. It can also reduce the likelihood of redundant or unnecessary care. 

The combination of government incentives and policies, patient needs and rising medical costs has stimulated stakeholders’ interest in Accountable Care Organizations, or ACOs. As reimbursements become more linked to the quality of care that patients receive, these groups that share responsibility and accountability are becoming increasingly attractive.

According to the American Medical Association, the term “Accountable Care Organization” first started circulating in 2006. However, the concept did not start picking up steam until passage of the ACA in 2010. Because of the potential for ACOs to improve efficiency in medical care, the ACA included programs to incentivize the establishment of ACO relationships that allow providers to share the money they save on healthcare. The ultimate goal was to integrate medical care among different providers - doctors, hospitals, long-term care facilities and so on - in order to better address the needs of individual patients.

The initial target patient population was individuals covered by Medicare Parts A and B, and these provisions of the ACA were enacted as of Jan. 1, 2012.

As of January 2013, the U.S. had more than 100 ACOs that were participating in the Centers for Medicare and Medicaid Services’ (CMS) incentive program, covering more than 2.4 million beneficiaries. Administrators’ early estimation was that the ACO incentives would save the federal government $940 million over the course of four years.

Experts from the AMA noted that it is likely that in the future, third-party payers will start to create their own shared savings programs that would encourage ACOs to extend their reach into commercial managed care markets.

Entities that are allowed to form and join an ACO and participate in one of the CMS incentive programs include any professional or group that is Medicare-enrolled and bills Medicare for services through a Medicare-enrolled taxpayer identification number. These include, but are not limited to, group practices, solo practices, acute care hospitals, pharmacies, Federally Qualified Health Centers, critical access hospitals and rural health centers.

According to the AHRQ, coordinated care entails six activities:

  1. Determine and update care coordination needs. Periodic assessments need to account for a patient’s healthcare needs based on physical, psychological and social dynamics.
  2. Create and update a proactive care plan. Physicians should create these jointly alongside patients and families in order to address both current and long-term needs.
  3. Communicate. The exchange of information pertaining to a patient’s care is critical for coordination. This can happen in person, over the phone or electronically. Communication takes place between healthcare professionals, patients and families; within healthcare teams; and across different healthcare teams.
  4. Facilitate transitions. Information must be shared when a patient’s care is transferred between two or more different entities. This is especially pertinent during patient discharges or admission to a skilled nursing facility.
  5. Connect with community resources. Patients may need help accessing services such as food stamps or support groups.
  6. Align resources with population needs. Assess the patient population as a whole in order to pinpoint any unmet needs.

All of these activities can help ACO participants meet certain quality measures put forth by CMS. These include standards for the patient and caregiver experience, care coordination, patient safety, preventive health and the treatment of certain populations at risk for various chronic diseases, such as diabetes, hypertension, ischemic vascular disease, heart failure and coronary artery disease.

With all the effort that goes into organizing an ACO, some providers may wonder why anyone would bother joining or forming an ACO in the first place. Individual providers would still receive payment under Medicare fee-for-service rules. In addition to those payments for individual providers, the federal law would allow ACOs that meet quality benchmarks to receive more money through various shared savings programs.

The main Medicare Shared Savings Program is aimed at Medicare fee-for-service providers who want to form ACOs. Organizations must serve at least 5,000 Medicare patients and participate in the program for at least three years. Existing ACOs that are not part of the Medicare Shared Savings Program will not automatically be recognized by CMS. As a group, interested providers must apply to the government agency. New applications are accepted every year during a specified application period.

Smaller physician-based and rural providers may also be eligible for a supplementary program known as the Advanced Payment ACO Model. This model, which delivers payments up-front every month in order to support their care coordination infrastructure, is designed for smaller ACO’s that may need access to additional capital to get started.

Separate from the Medicare Shared Savings Program is the Pioneer ACO Model, which includes 23 ACOs. These groups were already experienced with care coordination, and the program was designed to help them work together with private payers. CMS is no longer accepting applications to this model.

Aside from the models mentioned, there are other ACO programs geared toward specialized care, such as nursing home and elderly care. The CMS Innovation Center website archives many webinars led by experts who are experienced with the ins and outs of ACOs. These sessions cover topics spanning patient engagement, quality measurement and reporting, physician culture and more.

After learning about government financial incentives, better healthcare for patients and improved communication that moves away from the fragmented approaches of other care models, you may find the idea of forming or joining an ACO to be very appealing.

But is it right for you and your colleagues? One thing that you will have to keep in mind is that being part of an ACO cannot only change the relationship you have with your patients, but also with other providers, insurers and the government.

Physician practices that are looking to affiliate with hospitals as part of an ACO agreement need to evaluate their potential partnering facility for several factors. 

These include:

  • Compatibility and alignment of leadership
  • Electronic health records and medical staff input
  • Financial strengths
  • Management strengths
  • Synergy surrounding savings
  • Recruitment of new physicians
  • Increasing access to medical homes
  • Cost Integration

To maximize physician and financial resources, some budding ACOs may consider partnering with health insurers. However, there is an important consideration to make before entering such a relationship.

“There is a key threshold issue that must be considered prior to discussions concerning physician health insurer ACO collaboration, namely, the health insurer’s relationship to its competitors in connection with the ACO,” experts from the AMA wrote in an organizational guide to ACOs. “The nature of this relationship may in and of itself determine whether or not collaborating with the health insurer is an attractive possibility. For example, the health insurer may take the position that the ACO may not contract or otherwise partner with other health insurers or payers. If so, that fact alone may discourage the physician from further consideration.”

However, a relationship with an insurer may prove advantageous if it provides access to pre-existing physician networks for potential collaboration, financial resources to support the ACO infrastructure, patient experience data and systems that facilitate the application of cost-saving measures.

Due to the collaborative nature of ACOs, affiliating providers need to be aware of antitrust laws, even though their relationship is not considered a formal merger. Financial or clinical integration can help manage legal risks. Additionally, government agencies recognize certain “safety zones” for ACOs that participate in the Medicare Shared Savings Program and use similar governance and administrative processes in reaching both commercial and Medicare patients.

Transitioning to an ACO structure is not a decision to take lightly. There are clearly many factors to consider. One more important fact is the ongoing pressure from the dynamic patient population in the U.S. The Census Bureau estimated that the number of individuals age 65 years or older in this country will increase by 16 percent between 2010 and 2015. Senior citizens tend to have more complex medical cases than the rest of the population.

Innovative solutions are needed, and fast.