ACOs: Healthcare’s Best Hope
May 11, 2012
The future of healthcare in America may be wrapped up in these three letters: A-C-O, the Accountable Care Organization (ACO).
This model to provide high-quality, cost-effective care received momentum from the national healthcare law, but it will continue regardless of the law’s fate. Why? Because an ACO is a sensible, efficient, and patient-centered way to keep people healthy and then care for them during illness.
We’ve seen for decades now that paying doctors and hospitals for each individual service they provide (“fee-for-service payment”) does not create an efficient or effective healthcare system. Yet most care in the US is delivered this way, creating incentives to perform more services, which drives up costs. And, it encourages healthcare organizations to pursue high margin services that treat illness, rather than invest more in keeping people well. The result is a fragmented system of sick care, with little incentive for providers to coordinate care or prevent illness.
ACOs are a means to flip this sick-care system on its head – to pay for quality of overall care in a coordinated system. So, what is an ACO? An ACO is an alliance of healthcare providers (doctors, other professionals, and possibly hospitals) who contract with a payer (the government or a private insurer) to provide care for a defined population for a pre-determined budget based on prior total actual expense and the actual health of that population. If costs for those patients are lower than expected, providers share a portion of the savings – but only if the care meets pre-defined quality measures. This gives providers incentive to keep patients healthy and out of the hospital, to coordinate their care, and to meet the quality measures. With such shared accountability, costs are expected to drop.
As an example, consider a 65-year-old woman with congestive heart failure and diabetes. When she does not feel well, she goes to the emergency room and usually ends up being admitted. With an ACO, she would receive additional support to manage her conditions so as to avoid problems. If she did not feel well anyway, she could receive medical advice around the clock linked to her electronic medical record. Based on knowledge of her condition, a change in medication might eliminate a hospital visit.
In fact, innovative organizations have been functioning like ACOs long before the term was coined. As a practicing internist and cardiologist for 40 years, and more recently as chief executive officer of the largest independent non-profit physician group in Massachusetts, I have worked under a global payment system successfully for my entire career. I have seen how receiving a pre-set sum – the global payment -- for patients can inspire care coordination and communication. Our patients experience the benefits of ACOs every day in a trusted doctor-patient relationship, with access to teams of experts, and coordination among specialists and hospitals. We have seen how a strong base of primary care can improve quality while lowering costs; for example in 2010, we decreased cost growth against prior trends for our commercially insured patients by $64 million while increasing overall quality.
This year, we were chosen to be one of 32 Pioneer ACOs by the Center for Medicare and Medicaid Innovation. For us, this means bolstering programs that have already shown success, including outreach to make sure patients receive recommended screenings and preventive services, programs to assist patients in managing chronic illness, expanded weekend hours, around-the- clock access to medical advice linked to the patient's medical record, additional nursing support for those with highest risk of hospitalization, and greater doctor-patient communication by phone or email.
We look forward to being part of a unique learning collaborative with other Pioneer ACOs – and to showing what is possible. Ideally, our experience will help point the way toward fruitful areas for care improvement and savings. Federal officials expect the32 Pioneer ACOs themselves to save up to $1.1 billion over five years.
While the reform law accelerated formation of ACOs, leaders in healthcare are moving full speed ahead. The CMS innovation center launched a second initiative of 27 new ACOS in early April. Meanwhile, new commercial ACOs are announced each week. The signals are clear that ACOS are moving forward on many fronts.
Skeptics say that ACOs sound too much like 1980s-style managed care that fueled widespread reports of skimping on care. But the landscape has changed entirely. We now have information technology and incentives to ensure that appropriate care is provided, the ability to measure aspects of quality across providers, and ways to measure patient experience and outcomes. ACO rules include safeguards so that providers receive a share of savings only if their care meets quality definitions. Electronic medical records create a tool for collaboration and enable automatic alerts and other prompts to keep patients and care providers on track.
The ACO concept is filled with possibilities. Initiatives such as the Medicare Pioneer ACO are expected to show how we can fix the system to move us closer to the triple aim of improving care, improving the health of the population and reducing costs. Experience and new technologies are moving us along a sensible path of coordinated, patient-centered care – one that rewards accountability, quality and a shared interest in keeping patients healthy.
Regardless of the Supreme Court decision, ACOS are here to stay.
About The Author
Dr. Gene Lindsey is President and CEO of Atrius Health, an alliance of six community-based medical groups in Massachusetts and its largest affiliate, Harvard Vanguard Medical Associates.