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The Ins and Outs (and Upside Downs) of ACOs

Hoffman, Lisa

doi: 10.1097/01.EEM.0000397836.11515.4d


Health care reform may be the best or worst thing to happen to medicine, depending on your political leanings. But the one thing it has accomplished, said a former administrator for the Centers for Medicare and Medicaid Services, is the laser focus it has trained on what is really going in health care. In short: the health care system is morass of regulations that suffers from a lack of focus and accountability.

But riding in on its white horse, the accountable care organization promises better care at lower cost — and a break for providers, said Mark McClellan, MD, PhD, now the director for the Engelberg Center for Health Care Reform and the Leonard D. Schaeffer Chair in Health Policy Studies at the Brookings Institution.

“The traditional thing that we do in our health care policies when costs go up and we can't find any better solution [is] squeeze down the payment rates for providers,” he said, addressing the National Accountable Care Congress last year.

That is a strategy with which physicians are all too familiar, but the law also provides other ways to be paid if physicians and hospitals can identify a better method to deliver care, said Dr. McClellan, also a former FDA Commissioner. The goal is to reduce health care spending to the growth of the overall economy plus one percent, he said, which is still several percentage points below where spending growth per person in health care has traditionally averaged.

As the head of CMS, Dr. McClellan met with physicians groups around the country who were trying to provide better care at a lower cost, from tracking patients with chronic diseases to working with pharmacists to ensure prescriptions were filled. But they stressed that they were creating new strategies in spite of the way reimbursement works in health care, he said. “What was compelling was what they said next: ‘When we adopt these steps, we get killed. ... Medicare doesn't reimburse, many typical insurers don't reimburse for any of the[se] things ... so we lose money up front when we're try to invest in these ways in improving care. And ... to the extent that these steps actually work, we lose again because we no longer can bill for the things that Medicare does pay for, like the repeat doctor visits, the preventable admissions, and the duplicative lab procedures. So we're really swimming against the tide when we're trying to implement health care reform that we think makes the most professional and ethical sense for our patients.' ”

And that, Dr. McClellan said, is what accountable care organizations (ACOs) are fundamentally about: overcoming core barriers to give Americans the kind of health care everyone wants, “going from unclear aims to a front and central focus in our payment system, in our policies, and everything we do on [to] ... better health, better care, lower costs.”

Providers have to find ways to focus on accountability using better data that are patient-centered as well as better performance measures that provide support for paying for improved care at a lower cost, he said. It's about moving away from traditional fragmented care and “providing a pathway toward an accountable health care system that really does pays for value.”

Dr. McClellan said ACOs are providing opportunities for being paid that don't squeeze payment rates but move toward a more sustainable rate of spending growth while improving health. He acknowledged that the path isn't easy, but the law has suggested ways to make improvements, such as bundled payments, medical homes, and ACOs.

“We're either going to find a better way to pay for and deliver care, or providers are going to continue to face squeeze and squeeze and squeeze on how they get paid, and therefore on access and quality care. And there is too much at stake ... for us not to solve this problem,” he said. “This is part of Medicare. This is not a pilot program.”

ACOs, which start officially Jan. 1, 2012, are open to a wide range of provider groups that can build on private sector and state-based ACOs. The evaluation methods are based on specific benchmarks using historical spending and utilization data to track ACO performance. The program is broader than current Medicare shared savings, he said, and can include one-sided and two-sided shared savings models and a range of partial capitation models to replace a portion of fee-for-service payments. To qualify as a Medicare ACO, participants have to be accountable for quality, cost, and overall care for at least 5,000 Medicare beneficiaries for at least three years, have a formal legal structure to receive and distribute shared savings, report on quality, cost, and care coordination, and meet patient-centeredness criteria set by the Secretary of the Department of Health and Human Services.

“It's not an up-front investment and crossing your fingers. It's an up-front investment linked to an overall strategy and tracking for how this reform is doing at achieving better care at lower overall cost,” Dr. McClellan said. “This means that ACOs are not gatekeepers. Patients can go outside the ACO. They require a new kind of organizational collaboration by payers with providers so that we're not focusing just on volume discounts but rather on identifying specific meaningful ways that the care delivered by providers can be improved.”

Going forward, CMS has the authority to set benchmarks, ensuring that quality targets are met. As spending increases over time, payers and providers will have to determine a target for what baseline spending should be, negotiated for private payers or determined for Medicare. A range of payment models are possible, he said, and if actual spending is lower than the target, the savings are shared.

The meaningful performance measures that are part of ACOs should address multiple priorities, be outcome-oriented, and span the continuum of care, Dr. McClellan said. Although many systems don't yet have the capacity to think about overall costs and the quality of care, some are starting with claims and administrative data to measure readmission and complication rates. As these systems take hold and add the ability to track patients over time, they can grow more sophisticated. Eventually ACOs will use more complete clinical data like sophisticated electronic medical records and well established HIT infrastructures.

The key, he said, is to find a shared vision across the leadership team and the patient population being served. Dr. McClellan cited Tucson Medical Center as an example, explaining that they changed their governing body to include all stakeholders — consumer groups, state and local leaders, and private alliances — to ensure broad buy-in for their ACO. The Brookings-Dartmouth ACO Learning Network ( has pilot sites ranging from small — three independent physician groups at Tucson Medical Center with 80 providers and 7,000 Medicare patients — to large — a network of 950 providers and 37,000 Medicare patients at Carlton Clinic in Roanoke, VA.

“The window is now,” Dr. McClellan said. “If we don't take steps now to actually achieve better care at a lower cost, we will face increasing pressures on our unsustainable current way of delivering care.”

Click and Connect!

Confused about accountable care organizations? We were, too, but after doing a little research, we're feeling a little less intimidated by the government's plan for ACOs, which are scheduled to take effect at the beginning of next year.

Check out these links that explain what ACOs mean to you and your patients. Watch a video roundtable with three ACO experts, including Elliott Fisher, MD, the doctor who coined the phrase “accountable care organization,” and read what the blogosphere has had to say about ACOs. Or if you want a little light reading, click on the link for the actual Patient Protection and Affordable Care Act — all 906 pages of it!

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© 2011 Lippincott Williams & Wilkins, Inc.