Accountable Care Organizations: What They Are
Written by Joshua Kleinstreuer
Category: Healthcare Industry
IN A NUTSHELL:
- Goal of ACO is to improve patient care, reduce costs
- ACO attempts to minimize need for hospitalization
- Physicians paid based on performance incentives
In recent years, especially since the Patient Protection and Affordable Care Act was passed, Accountable Care Organizations (ACO) have popped up across the United States.
An ACO is a network of physicians and hospitals that shares financial and medical responsibility in order to help reduce the financial burden of medical costs yet still improving patient care—with the ultimate goal of keeping patients out of the hospital. While primary care physicians serve as the cornerstone of an ACO, the organization can also include health care specialists, and even private companies in addition to the hospitals.
As a market-based solution, ACOs rely on every member of various organizations voluntarily collaborating to achieve these important goals. As of January 2020, there are 558 Medicare ACOs serving more than 12.3 million beneficiaries with hundreds more commercial and Medicaid ACOs serving millions of additional patients, according to the National Association of ACOs.
According to legislation within the Patient Protection and Affordable Care Act, an ACO has to manage the health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years. Lawmakers decided to include ACOs as part of the legislation due to the fact that a large percentage of the population is entering retirement—which means the costs of caring for elderly Americans are expected to skyrocket.
How an Accountable Care Organization Works:
If an ACO is going to function properly, it must have a plan in place to share information between health care providers and medical facilities within the ACO. Any provider that saves money while still meeting a set standard of patient care is able to keep a portion of the savings. Health care providers also have the option to risk losing money if they want to aim for a bigger reward, or they can enter the program with no risk at all.
Ready Doc™, designed by Intiva Health, is a platform that can aid with the privileging and credentialing of health care providers at various facilities within an ACO to help them achieve their goals. Providers and administrators can upload various medical documents, licenses, and credentials and securely share them with other facilities.
At the same time, providers can improve care team coordination with a HIPAA-compliant messaging service, Ready Doc™ Messaging, on desktop workstations or Smartphones. The tool enables health care teams to create custom groups based on users or topics and organize conversations. Additional features such as priority messaging, message forwarding, delivery confirmation, and message recall gives providers and their care teams total control of communication flexibility.
How an Accountable Care Organization Receives Payment:
In the traditional health care payment system, which is a “fee for service” model, medical facilities and physicians are generally are paid for each test and procedure. This payment model can potentially increase the cost of health care, as providers are rewarded for conducting extra lab test, procedures, or additional care even when it’s not needed.
While an Accountable Care Organization does not eliminate the “fee for service” payment model, they create an incentive for medical facilities and health care providers to be more efficient by offering bonuses when providers keep health care costs at a minimum.
The health care quality standards still exist for medical facilities and physicians, however there is more of an emphasis on prevention and carefully managing patients with chronic diseases. In other words, providers get paid more for keeping their patients healthy and out of the hospital.
Accountable Care Organization: Patient Perspective:
Physicians will likely refer patients to hospitals and other health care specialists within the same network. However, patients are usually still free to see doctors of their choice outside the network without paying more. Health care providers who are part of an ACO are required to alert their patients, who can choose to go to another doctor if they choose to do so. The patient also has the right to decline that any of their personal health information (PHI) is shared within the ACO.
According to the NIH, opportunities exist for rural providers to improve care and share in the cost savings provided by forming an ACO. Achieving cost savings is one of the two primary goals of an ACO, with the other being providing high quality care to a defined population. The cost savings would be achieved by emphasizing the importance of preventive health care, increasing operational efficiencies, and reducing hospital readmissions.
Ultimately, if their organization and operations are effective and conducted appropriately, Accountable Care Organizations may contribute to meeting the challenge of providing cost-effective care to a growing number of chronically ill patients.
Accountable Care Organization: Model for the future of health care
Some experts believe that an ACO can serve as the model for the future of the health care system in the United States. At the same time, health care economists warn that hospital mergers and provider consolidation could increase too rapidly which would result in less independent physicians and medical facilities.
Currently, health systems have more leverage in negotiations with payers, which can increase the cost of health care for patients as well as limit their choices of where and how to receive treatment.
One of the major hurdles for hospitals and physicians that prevents an Accountable Care Organization to become the standard of health care in the United States is that ACOs are meant to reduce hospital stays, emergency room visits and expensive specialist and testing services. These are all primary revenue avenues for medical facilities and physicians. Another hurdle is a lack of leadership and accountability. In order for the ACO to function properly, every member of the group has to do their part to meet quality care standards to receive the monetary incentives built into the program.
Nonetheless, Accountable Care Organizations offer potential for the future of health care in America, especially as the entire industry undergoes a change throughout and following the COVID-19 pandemic.
If formed correctly, they could assist in accomplishing the framework to optimize health system performance developed by Institute for Healthcare Improvement and known as the “Triple Aim.”
- Improving the patient experience of care (including quality and satisfaction)
- Improving the health of populations
- Reducing the per capita cost of health care
However, forming an ACO on paper is easy, yet delivering on the promise of reducing the financial burden of medical costs yet still improving patient care is much more difficult.
Health care organizations must be prepared to invest in technology that enables them to provide the level of care for the patients with a staffing and payment model that may be different than what they are used to. As the entire world adapts to a new normal, now may be a better time than ever for the health care system as a whole to adopt the ACO model.