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A Primer on Accountable Care Organizations
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Editor's note: For more on ACOs, get three experts' opinions in our new feature, Doctors in Dialogue.

Over the past three decades, we have seen enormous advances in medical care as doctors have developed better ways to diagnose and treat patients. During the same time, there have been many changes in how that care is paid for and where it is delivered. Those of us who have lived through various iterations can be forgiven for our skepticism about any new “system” purported to revolutionize the delivery of health care. However, the newest acronym — ACO — stands for a concept that could represent a sea change in the very complex system of medical care that we have in our country.

What Is an Accountable Care Organization?
undefinedAccountable care organizations are groups of doctors, hospitals and other health care providers who join together to coordinate care for a group of patients. The purpose of an ACO is to reduce the cost of care by eliminating duplication of effort and testing, while increasing the quality of services. ACOs can be started by any health care entity, but at this point most are driven by hospitals or large groups of doctors.

How Did ACOs Come About?
The term “accountable care organization” was first used in 2006 by two doctors at a meeting of the Medicare Payment Advisory Committee.1 It was included in the 2010 health care reform law. In that legislation, Congress authorized CMS to contract with ACOs for groups of 5,000 or more patients. The ACO provides medical care to those patients and reports quality measures back to Medicare. The program is a “shared savings” model in the sense that, if the ACO is able to provide care for less money than Medicare would expect for that group of patients, and if the ACO meets certain quality measures, the ACO receives 50 percent of the savings, with Medicare keeping the remaining 50 percent.

It is interesting and important to note that CMS has thus far refused to require patients assigned to an ACO to use only providers who are part of that ACO. In other words, patients assigned to an ACO can still choose any doctor or hospital for their care, and there is no penalty to them for their choice. Some ACOs have been disappointed by this decision, believing that they cannot be truly “accountable” for cost savings if patients can access any provider they choose. However, in the final rule implementing the section of the health care reform law that authorizes contracts with ACOs, CMS states, “We have also been vigilant in protecting the rights and benefits of fee-for-service beneficiaries under traditional Medicare to maintain the same access to care and freedom of choice that existed prior to the implementation of this program.”2 Clearly, CMS is committed to allowing patients to go to any provider, even if that policy reduces the ability of ACOs to control the cost of providing care.

Under the current ACO provisions, doctors, hospitals and other providers will continue to be paid their normal reimbursements for the care they provide to ACO patients. Then, at the end of each contract year, Medicare will determine whether those payments have been less than expected for the enrolled population; if so, CMS will share the savings with the ACO, provided the quality reporting measures have been met. The ACO will have to decide how to distribute the savings among its providers.

Why Did Congress Authorize CMS to Contract With ACOs?
As someone once said, “It’s all about the money.” In 1960, less than 6 percent of our nation’s annual gross domestic product (GDP, the value of all goods and services produced in the United States) was spent on health care. In 2010, that figure was 17.9 percent,3 and if we project the growth curve into the future, it appears that health care expenditures could consume 50 percent of the U.S. GDP before the end of this century. All other countries spend significantly less per capita and less of their GDP on medical care: Switzerland, France and Germany are usually the next highest, with rates of around 11 percent of GDP. For these reasons, CMS is continually looking for ways to reduce the amounts spent on health care in the United States.

There is a common view among health care leaders that about one-fifth of the expenditures made on health care in this country are due to complications from other care provided.4 If an ACO could reduce those costs, about $400 billion could be saved each year. In addition, coordination of care through an ACO could result in less duplication of services, especially testing, thereby saving billions more. Authorizing CMS to contract with ACOs was Congress’ way of pushing hospitals and other providers to work on coordinating care and improving quality to reduce overall health care expenditures. Although the health care reform law applies only to Medicare patients, many health insurance companies are following that lead and are looking at contracting with ACOs in hopes that their outlays for medical care can be reduced.

What Is the Current Status of ACOs?
Last December, CMS selected 32 organizations and designated them as “pioneers” in the ACO model. Those ACOs began their contracts on Jan. 1, 2012. In early April of this year, an additional 27 health systems were announced as having been selected for the program; they will serve about 375,000 Medicare beneficiaries in 18 states. In July an additional 88 ACOs were approved and CMS is currently reviewing another 100 ACO applications, so the program is off to an auspicious start.5 Because hospitals, doctors and insurers in the private health plan realm are also actively pursuing the principle ideas behind the ACO section of the health care reform law, every ophthalmology practice needs to pay attention to those developments.

What Should Our Practice Do About ACOs?
The main risk for ophthalmology practices from ACOs is loss of patients from an ACO that excludes their doctors from its panel. Although Medicare says patients will be able to stay with their current ophthalmologist even if they are assigned to an ACO, other doctors in the ACO will likely refer new patients to ophthalmologists who are members of the ACO. In addition, some private health plan–affiliated ACOs may employ financial incentives that make it difficult for patients to stay with their existing eye doctor.

The bottom line is that your practice may need to have a “seat at the ACO table” so you can protect your access to patients. This means making sure that you are actively involved in ACO discussions in your local area and that you associate with the organization(s) that appear to have the best chance of success. In addition, having input into the ACO will help you influence its policies and payment distributions.

There is another important consideration that is going to be a side effect of the move to ACOs. I was recently discussing ACOs with my internist, who is a partner in a large multispecialty clinic. He indicated that his practice is training its doctors to refer to specialists who control costs, provide quality care, get good outcomes and have low incidences of complications. They are doing this because they know that the time will come when their overall compensation will be significantly affected by the quality of care that their entire organization provides. It is critical that your practice pay close attention to the quality and costs of the service you provide, and it is a good idea to establish a regular program of patient surveys to ensure that you are serving patients in the way they desire. Patient satisfaction will undoubtedly be a factor in quality measurements for many ACOs.

ACOs: A Sea Change or Just Another Forgotten Acronym?
Only time will determine whether ACOs become a new way of doing business for health care providers or just another footnote in the history of health care reform attempts. However, the principles of improving quality, eliminating duplication and increasing efficiency to reduce the costs of health care are here to stay. Practices that excel in those areas will be in a much better position to thrive in the health care environment of the future.

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References

1 Jordan T. Cohen, A Guide to Accountable Care Organizations, and Their Role in the Senate’s Health Reform Bill, March 11, 2010.

2 Federal Register, vol. 76, no. 212 (Nov. 2, 2011), p. 67804.

3 Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis.

4 HealthLeaders Media, Align Physicians and Hospitals in a Non-Aligned World, 2012, p. 17.

5 Jenny Gold and Christian Torres, ACOs multiply as Medicare announces 27 new ones, Kaiser Health News, April 10, 2012.


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About the author: This article is an adaption of the original version, which appeared in the May 2012 AAOE Executive Update. It was written by Derek Preece, MBA, of BSM Consulting, a member of the AAOE Consultant Directory.

 
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