ACO Basics

What is an ACO?

ACO stands for accountable care organization and is a concept that has seized the attention of both government and commercial payers throughout the United States. The goal of an ACO is to encourage physicians and hospitals to coordinate care by holding them jointly responsible for the quality and cost of that care.

At its most basic, an ACO brings together any number of unrelated healthcare entities – such as primary care practices, hospitals, specialty practices, ambulatory surgical units, home care providers, pharmacies and diagnostic centers – to oversee and coordinate care for a defined population of patients.

ACOs coordinate care for a population across multiple medical specialties and care settings, both inpatient and outpatient. They promote evidence-based care practices and use of information technology.

The ACO concept embraces a shared-services approach to healthcare reimbursement, though the exact reimbursement models have yet to be fully defined. Shared-savings approaches motivate ACO participants to coordinate care and lower costs in order to maximize profits. ACOs are held accountable by reporting performance on quality measures such as prevention, disease identification, ongoing intervention, patient satisfaction, and total cost of care. Any resulting cost savings are to be shared among the participants.

In effect, ACOs are an attempt to reap the benefits of integrated delivery systems such as Kaiser Permanente and Intermountain Healthcare without the restriction of bricks-and-mortar boundaries and common ownership.

What is the status of ACOs?

ACO models are still being formulated.

Although coordinated at the federal level by the Centers for Medicare and Medicaid Services (CMS) to reduce Medicare spending, the ACO model has also captured the attention of commercial payers.

CMS is scheduled to issue its rule for bundled payments and ACO qualifications in January 2012. In the beginning, only a limited number of organizations will receive designation as ACOs by CMS for contracts that initially run through 2015. These ACOs will be certified by NCQA, and certification criteria are currently being written.

Significantly, several future-thinking commercial payers aren’t waiting for the results of the CMS pilots. They will be partnering with physician groups and hospitals to launch ACOs that cover their members who receive care from those doctors and hospitals.

Who can participate in an ACO?

Physicians and hospitals are the target, particularly multi-specialty group practices, independent practice associations (IPAs), networks of individual physician offices in partnership with hospitals and hospitals that employ clinicians or have affiliations with them, and integrated health systems.

What is required to be an ACO?

Eligible organizations must demonstrate that they are capable of doing the following:

• Defining processes to promote care quality, report on costs, and coordinate care.
• Developing a management and leadership structure for decision-making.
• Developing a formal legal structure that allows the organization to receive and distribute bonuses to participating providers.
• Including the primary care physicians (PCPs) of at least 5,000 Medicare beneficiaries
• Providing CMS with a list of participating PCPs and specialists.
• Having contracts in place with a core group of specialist physicians.
• Participating for a minimum of three years.

What are the main challenges facing ACOs?

• Governance – Establishing an entity that can manage risk and balance the interests of the various organizations and individuals involved. Creating a shared vision and commitment around the best way to provide care.

• Physician participation – Recruiting and retaining primary and specialty physicians.

• Technology – Adopting health information exchange technology that enables ACO participants to leverage existing information systems to exchange data across care locations, facilitate care collaboration, perform quality reporting and ensure all the data for fulfilling ACO objectives is captured.

• Consumer acceptance – Educating patients on the benefits of coordinated care and ensuring them that the ACO will not skimp on care to save money.

What are the benefits to a hospital in participating in an ACO?

• Better and demonstrable clinical outcomes.
• Enhanced reputation for quality.
• Physician loyalty.
• Decreased costs of doing business.
• Increased efficiency.
• Improved affinity with the healthcare community.
• Patient satisfaction.

What are the benefits to physicians for participating in an ACO?

• Improved office workflow efficiencies.
• Ease of access to key clinical information.
• Increased care coordination and enhanced communication with all members of the patient’s care team.
• Ability to manage difficult cases that require multiple visits and involve multiple providers.  
• Improved application of evidence-based medicine through disease management protocols and clinical decision support.
• “Hassle-free” clinical practice and enormous increase in physician and staff job satisfaction.

What are the benefits to patients?

• Coordinated care across both physician offices and hospitals.
• Better health outcomes.
• Availability of full medical history accessible by all members of the care team and in case of emergency.
• The end to repeatedly filling out forms on medical history.
• The end to repeats of unnecessary tests.

What is the technology foundation required to adequately support an ACO?

• Integration across disparate applications and care settings.
• A unified view of the patient across institutions and encounters.
• Continuous live updates from participating entities and alerts of such updates to ensure timely care coordination across all responsible parties.
• Disease and case-continuity process and data views tuned for care, outcomes, and bundled-payment contracting.
• Management consoles that enable tracking of a patient’s care across all settings for administrative decision-making and reimbursement management.
• Aggregation of population records to enable reporting on quality measures such as follow-up frequencies, readmission rates, and preventative care.

Are ACOs going to be “the answer?”

Regardless of whether ACOs take center stage or play a supporting role in the evolving healthcare landscape, one thing providers can bank on is that care-delivery reform is inevitable. Government, commercial payers, and self-insured plan sponsors will implement dramatic changes to put the health system on more solid and efficient footing to reduce costs and improve patient health outcomes. Whatever shape these reforms take, a technology infrastructure that enables an end-to-end, holistic view of the business and delivery of care will play a critical role and should be top of mind as organizations prepare for the future healthcare landscape.