Eleven Things to Know About ACOs

April 12, 2011

ACOs will come in many shapes and sizes; until the final rules are announced, here are eleven things you should know.

Accountable Care Organizations, or ACOs, are the centerpiece of the government’s latest effort to reform healthcare and save Medicare from bankruptcy. Until HHS released its proposed rules for ACOs on March 31, there had been much conjecture, but little concrete information, on the organizational and risk/reward structures of ACOs. We will not know for some months, until the final rules are announced, the shape ACOs will take. Until then, here are eleven things you should know about ACOs.

1. ACOs are one of several complementary initiatives chartered by the Affordable Care Act to help achieve a three-part goal: lower costs, improved care, and better health. Other reform initiatives include medical homes, value-based purchasing, and bundled payments. These initiatives are not mutually exclusive, and participation in one reform effort will not preclude participation in another.

2. ACOs are mechanisms to coordinate patient-centric care. Two individuals - the patient and his primary-care physician - will share the spotlight, with the government believing (hoping?) that an informed and empowered patient will make better decisions than are being made now on his behalf. While this premise may be insulting to many, it is a core tenet of the government’s reform strategies.

3. ACOs will focus on areas where savings can be quantified and are most likely to be produced - chronic-care management and preventive care. Outcomes will be an increasingly important metric.

4. ACOs are for Medicare. The government’s proposed and final ACO rules do not govern commercial payers or employers, two major stakeholders with cost control ideas of their own. Commercial payers may seek to organize ACOs within their Medicare plans, and payers and employers may move toward ACO-like models, but the rules and incentives of the Affordable Care Act need not apply.

5. Medicare will contract directly with ACOs for a three-year period. An ACO will have the option of having a one-sided risk model (sharing of savings in years one and two, sharing of both savings and losses in year three) or a two-sided risk model (sharing of savings and losses all three years). Those with less experience and fewer reserves to sustain a loss are expected to go with the one-sided risk model. Neither model has been given a catchy acronym, yet.

6. Medicare patients will have choices. They can choose whether to be in an ACO or not. If they join an ACO, they can see any Medicare provider they wish, even if the provider is not in the patient’s ACO. In this regard, ACOs are more like PPOs than HMOs - the key difference being patients will not be penalized for going out-of-network.

7. Each ACO will be governed by a board that includes both healthcare providers and Medicare beneficiaries. This stipulation is consistent with the government’s goal of ACOs being patient-centric and should make for some interesting board discussions about the ‘business’ of medicine.

8. An ACO will be responsible for the care of a minimum of 5,000 Medicare beneficiaries. Thus, a mid-sized primary-care group could become an ACO. Most urban and suburban ACOs likely will have more than 5,000 Medicare beneficiaries; the government might establish ACO-light models for rural areas with smaller concentrations of Medicare beneficiaries.

9. I would think - and this is but my opinion - a primary-care physician would belong to one ACO, but a specialist could belong to several ACOs. ACO primary-care physicians will use specialists who help them provide the best chronic care and preventive care management, and these specialists may not be with the same healthcare system (see # 5).

10. ACOs will come in many shapes and sizes. The proposed rules allows for ACOs led by a group practice, a network of individual practices, a hospital employing physicians, and more. The government will monitor the relative performance of each model to determine which model offers the best savings and (I presume, perhaps naively) the best care.

11. ACOs will not be cheap to develop or operate. Though the most effective ACO structure may be one driven by a small and cohesive primary-care practice, such a practice is least likely to be in a position to create and run an ACO.

I close with a quotation by CMS’s administrator, Dr. Donald Berwick, from the March 31, 2011, issue of the New England Journal of Medicine:

"Whatever form ACOs eventually take, one thing is certain: the era of fragmented care delivery should draw to a close. Too many Medicare beneficiaries - like many other patients - have suffered at the hands of wasteful, ineffective, and poorly coordinated systems of care, with consequent costs that are proving unsustainable."

That, my friends, is Medicare’s challenge to us all - regardless of the acronym du jour.

Lucien W. Roberts, III, MHA, FACMPE, is associate administrator of business development at MCV Physicians. He also consults with medical groups and health systems in areas such as compliance, physician compensation, negotiation, strategic planning, and billing/collections. He may be reached at lucien.roberts@yahoo.com.