One part of the Patient Protection and Affordable Care Act (PPACA) that’s hit American health care like the British Invasion is accountable care organizations, or ACOs. At first, there were just a few, then some more and now they’re all over the place, just as The Beatles, The Rolling Stones, the Who, the Kinks and other groups took over American pop culture in the 1960s.
In an ACO, doctors, hospitals, Medicare, providers and patients come together like John, Paul, George and Ringo to coordinate health care with the idea of improving quality and reducing costs. When PPACA was passed, ACOs were touted as a way to lower health care expenditures under Medicare and encourage collaborative care among providers.
ACOs now have been around long enough to quantify some results of their efforts, even though the transition hasn’t been easy. By all appearances, ACOs are going to be around a while, so benefits brokers and agents should possess a better understanding of ACOs to better serve clients and beneficiaries.
“It’s not new to health care reform, the concept predates PPACA, but PPACA was really the accelerant to it and put the pilot programs in place,” says Warren Skea, director of PricewaterhouseCoopers’ Health Enterprise Growth Practice.
The current landscape
While a few ACOs were in place before 2010, the number of ACOs reached more than 400 in 2014, with some estimates placing the number at more than 600. And, according to the Kaiser Family Foundation, about 14 percent of the U.S. population is now covered by an ACO arrangement.
The Centers for Medicare and Medicaid Services in January touted the findings of an ACO savings analysis. The analysis said that more than 50 ACOs had managed to save about $380 million. That analysis also said that half of the ACOs that started in in 2012 had already managed to lower costs.
“These innovative programs are showing encouraging initial results, while providing valuable lessons as we strive to improve our nation’s health care delivery system,” said Kathleen Sebelius, Health and Human Services Secretary at the time. “Organizations of various sizes and structures across the country are working with their physicians and engaging with patients to better coordinate and deliver high-quality care while reducing expenditure growth.”
More and more health care providers are joining ACOs, too. Regional and local hospitals, physician groups, independent physicians’ associations and nonprofits are well represented in ACO agreements across the country. Some very large players in health care began exploring ACOs before PPACA, such as Aetna, and others have gotten into the game as well, including Blue Cross and Anthem.
A new model
An ACO is basically a different model for the delivery and payment of health care services. In an ACO, providers are compensated by keeping patients healthy, reducing inefficiency and redundancy and implementing preventive medicine initiatives. Traditionally, health care used a fee-for-service model, which can lead to unnecessary tests, procedures or therapies.
While an ACO can still charge for services, the payers and providers voluntarily work together to coordinate care, which means a particular test, for example, gets shared within an ACO and not repeated by another doctor or hospital. ACOs are required by law to meet 33 quality standards, treat chronic conditions and can be penalized for not meeting efficiency and quality requirements. The ACO essentially works under Medicare, which serves as the primary payer with public and private health care providers responsible for providing care.
“I had one client tell me, ‘Warren, this is new and we do have to have new skill sets. One floor below us, I have a whole floor of biostatisticians and actuaries and a few years ago, I would never have needed those individuals,’” says Skea. “It’s very different from the old model. There will be those that can make the leap and manage it but for others it’s very different — for executives and physicians alike.”
The CMS defines three different types of ACOs. The Pioneer ACO Model was designed for early adopters of coordinated care under PPACA. That law only pertains to some of the current ACOs active in the market, though. Most ACOs operate under the Medicare Shared Savings Program, which allows for traditional fee-for-service providers to shift from that model of healthcare payment to the ACO model and share in the savings. Lastly there’s the Advance Payment ACO, which is basically an incentive program for some ACOs in the Medicare Shared Savings Program.
“If you’ve seen one ACO, you’ve seen one ACO,” Skea says. “I don’t think there’s one model or blueprint for getting an ACO up and going. And that’s somewhat by design. Even though there’s a lot of issues that are common, health care is still practiced and received locally. The organizational aspects and the market aspects are very local. One in Western Colorado will look different from one in New York and that will be different from one in Florida because of the participants. This model turns traditional fee-for-service on its head. You’re changing the reimbursement model.”
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