The ACO Controversy

The current discussion in the health care world over Accountable Care Organizations (ACO) will soon develop into a debate about their value and sustainability.  One side seems to think that ACOs will help solve our national health care crisis, while the other side criticizes the idea as just another program muddying the waters and confusing patients.  Some say ACOs are not going to be cost-effective and that they will be tossed out in the long run, while others tout them as the best way to provide quality care for Medicare patients.

ACOs, designed to improve care and save millions of dollars, are just one of the multitude of initiatives coming out of the Affordable Care Act of 2010.  The Health Care Reform package rolls out new programs for four years and beyond and first on the list for 2012 is the formation of ACOs.  The idea is that by providing incentives for physicians, hospitals, and other health care providers to join together and coordinate patient care and reduce hospitalization, Medicare and Medicaid patients will receive better quality care at reduced costs.  Centers for Medicare and Medicaid Services (CMS)  Administrator, Don Berwick, M.D. says, “Improving coordination and communication among physicians and other providers and suppliers through Accountable Care Organizations will help improve the care Medicare beneficiaries receive, while also helping lower costs.”  You can watch a video of Dr. Berwick’s 2011 announcement of the program here.

It is projected that these collaborating groups will save Medicare $960 million over three years in combining care by different medical specialties into one group.  Proponents say that if doctors and other providers work together and take responsibility for Medicare beneficiaries in a group, the cooperative effort will help reduce hospital admissions and unnecessary procedures.  The current system rewards doctors for doing more procedures and hospitals for keeping beds full.  According to CMS, the proposal is to pay based on outcomes, while still providing a fee for services performed.  The groups are formed on a voluntary basis by providers and, unlike Managed Care Organizations, ACOs give patients more choices rather than limitations.

Because the majority of Medicare patients suffer from multiple conditions, they usually receive care from multiple providers and clinics.  When a patient with arthritis, high blood pressure, and diabetes sees four or five different physicians who don’t communicate with one another, care is often duplicated and the risk for errors is increased.  Many of these patients are frustrated by their lack of control over their health care.  The goal of the ACOs is to eliminate that frustration by giving physicians within an ACO better information about their patients’ medical history.  Treatment, medical records, charts, prescriptions and other patient information will be shared among the group.

The incentive for the physicians is that providers keep a portion of the money saved.  CMS will monitor ACOs for quality and cost-efficiency.  Where costs are reduced, a percentage will be given back to the group.  Exactly how this will work is still not very clear, but defenders of the plan say it will significantly increase the health care provider’s bottom line.  Opponents argue that the incentives are actually very small and would be of little help offsetting the reduction in Medicare reimbursements on the horizon. 

Additionally, the start-up costs for a 200-physician ACO are projected by the American Hospital Association (AHA)  to be anywhere from $1 million to $11 million.  While it has been proposed that advanced payments be given to help with start-up, contestants claim that the incentives offered are not nearly enough to pay for the initial investment required.  Group administrators and physicians need to consider many aspects of the changes that may occur when applying for ACO status: Technology, computer systems, electronic medical records systems, data integration, privacy, security, administration, staffing, and management of the group.  It appears that it could take years to recover the costs involved in getting an ACO off the ground.  

Because of the expense of forming an ACO, early indications are that hospitals are more likely to be able to afford the upfront costs.  In fact, one report shows that 60% of the current 164 identified ACOs are hospital-sponsored while only 23% were formed by physicians.  The rest are attributed to health plans and other organizations.  But the program is still new and we may see more physician groups forming ACOs as the results are reported.  Some may see this as an opportunity, while others may reject the idea altogether. 

If you are considering forming or becoming part of an ACO, please contact your Keane representative to discuss the impact this change may have on your medical malpractice insurance.  We are keeping a watchful eye on the developments and working with the insurance companies to determine how to best cover these groups.

We’d like to hear from you!  As a physician or an administrator, what’s your opinion of the pros and cons of ACOs?  Are they the future of our healthcare system?  Or here today gone tomorrow?