Accountable Care Organizations


Accountable Care Organizations (ACO) are a type of payment and healthcare delivery system that bases reimbursement on quality of care.  A group of healthcare providers form an ACO to provide care to a group of patients.  According to CMS an ACO is an “organization that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.”  The health reform law established a Medicare ACO as of January 2012.  However, ACO’s in one form or another have been around for some time.

In the 1970’s physicians banned together and endeavored to act as health insurers but more commonly they would contract with various payers to provide total care to a patient population.  The theory behind this was if they could control the costs associated with managing their patient population they would reap the rewards of increased profits for providing the care they would have anyway.  This was not without its pitfalls.  Patients were unhappy with the limited access to providers, as the physician organization dictated which provider could see which patients.  Also, concerns were raised that individuals were denied certain tests to contain costs.  As one can clearly see there was the potential for conflict of interest.  Yet cost containment was part of their agenda and one can agree that there is a need for cost containment in health care

The most common model and in the one largely in force today is the physician fee for service payment structure.  Here, physicians order services for patients in attempt to diagnose the disease process, if any, behind their signs and symptoms.  One could argue this incentivizes the performance of services thus resulting in payments from the insurer resulting in over utilization of resources.  Imagine this, how many patients were helped, treated, or cured as a result of this model of care?  However, when the physician is connected financially to the care of a patient it does affect the way in which he utilizes resources.  Is that altogether wrong?

Although medicine is considered a science, so much of the treatment of a patient involves trial and error.  Take for example medication management.  The physician prescribes an antihypertensive and the patient is asked to trial the medication and monitor their blood pressures at home.  After a couple weeks the medication is found to not provide enough therapeutic benefit so another antihypertensive is prescribed.  The same process is followed, this time the medication is found to provide therapeutic results.  Why does one medication provide the desired results over another similar medication?  Since each patient is an individual each medication responds individually.

Let us use the above illustration and modify it slightly.  The patient trials several medications and several dosages but none of them yield the desired therapeutic results.  So the physician orders diagnostic testing in an attempt to evaluate what the root cause behind the hypertension is.  After ultrasounds and angiograms the patient is diagnosed with renal artery stenosis, or a blockage in the artery the leads from the abdominal aorta to the kidney.  The artery is stented and the patient’s hypertension is resolved.

The goal of ACO’s is to combine the benefits of the capitation model with the physician fee for service model.  The assumption is made that these patients are already integrated into a health network of sorts by virtue of the fact that they utilize the same hospital network for services therefore their physicians are part of that same network.  The theory is that if more emphasis is placed on the primary care physician’s ability to orchestrate care it will reduce costs by possibly eliminating unnecessary services.  When these cost savings are realized there is the opportunity to reap some share of the savings, but just how that will be divided among the ACO’s providers has not been established.

The initial demonstration project began in 2005 focused primarily on Medicare; this however yielded mixed results.  The demonstration project is over, and in spite of the results is in full force with other groups implementing these models as well.  One can expect the ACO methodology to evolve over time. Only time will tell if these changes will truly result in a better physician patient relationship or again leave the provider scrambling to provide services while insurance carriers continue to ratchet down reimbursements.

University Hospitals is a local hospital that has formed an ACO to provide care to it’s employees that participate in its health plans.  By participating in is various wellness programs its members save money on their premiums.  Please see  for how just one health system is implementing the ACO model.

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s