Within the Patient Protection and Affordable Care Act of 2010 is a provision setting up a program for the implementation of accountable care organizations (ACOs). This article explains the proposed ACO model and discusses major implications regarding this model of health care reform including the following: What will it take to implement the program successfully? What are the opportunities for savings under the model? What are the potential downfalls of the program as proposed? What impact would the implementation of an ACO have on the practice of gastroenterology?
Why accountable care organizations?
On March 23, 2010, President Barack Obama signed the Patient Protection and Affordable Care Act into law, signaling the beginning of an effort to reorganize and restructure health care for Medicare beneficiaries. This law was aimed at correcting 2 of the most critical issues with the United States health care system: unduly spending and inconsistent quality of care. The United States spends more than $2.4 trillion on health care. Overall, the United States spends $3000 to nearly $5000 more per capita on health services ( Fig. 1 ) and nearly twice as large a percentage of the gross domestic product than comparable countries worldwide, including Canada, the United Kingdom, and New Zealand.
High health care costs threaten the sustainability of Medicare and the affordability of health insurance in general. Furthermore, despite these huge differences in health care spending, the United States falls significantly behind in measures of performance, including quality of care, efficiency, access to care, equity, overall health of patients, and adoption of integrated information technology. Among those receiving Medicare in the United States, research has shown that, on average, regions with higher per beneficiary spending actually produce a lower quality of care and patient satisfaction. In other words, quality and cost are not intrinsically linked, and it may be possible to simultaneously improve the quality of US health care while decreasing expenditures.
Why does US health care lag in almost all measures of performance when spending exceeds comparable countries considerably? Part of the problem driving the high costs in the US health system, in addition to the greater use of hospital services, specialists, and diagnostic tests, is the burden of fragmented care with attendant waste and duplication. Furthermore, the current fee-for-service payment system rewards quantity of care rather than quality. Another factor driving spending stems from a minority of patients covered under Medicare and Medicaid who are responsible for 64% of the costs. Opportunities to lower spending include the avoidance of unnecessary hospitalizations, reducing rates of readmissions, expanded efforts to decrease hospital-acquired infections, and adding infrastructure for both preventative care and palliative care.
In order for the US health care system, particularly the public health insurance programs, to sustain through the aging of the baby boomer generation and beyond, it is imperative that our nation finds some way to lower spending and amend wasteful practices that rise from the fragmentization and disorganization of the current system. In the federal government, one proposed solution uses health information technology and payment reform to better integrate and coordinate care, thus, allowing for a greater focus on quality of treatment over an episode of care. The medium for these changes comes in the government’s recommendation to form accountable care organizations (ACOs).
What does the patient protection and affordable care act say about ACO s ?
In addition to extending coverage to millions of Americans through Medicaid and other mandates for health insurance coverage, the Affordable Care Act laid out mechanisms for the health care industry to reorganize to meet increased demand, improve quality of care, and lower costs.
In section 3021 of the act, the Center for Medicare and Medicaid Innovation was created to “test innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care furnished to individuals.” In other words, this new component of the Centers for Medicare and Medicaid Services (CMS) was given the significant task of selecting new models of payment and delivery of care aimed to maximize efficiency and quality of care.
Payment Schemes
ACOs are not a panacea but one of several complimentary initiatives within health care reform. Another area of health care realignment under the Affordable Care Act includes strategies for payment reform with reimbursement models that emphasize care for an overall population of patients. The act includes a provision that shifts payment away from fee for service and toward fee for performance or comprehensive payment, such as bundled or global payments. Fee-for-service payment has been targeted as fostering the application of unnecessary or wasteful testing and procedures that emphasizes quantity of care over quality, driving the hefty cost of health care higher. The act sets up pilot programs to test the suitability of bundled payment schemes.
Although the traditional fee-for-service method of payment allocates a predetermined sum for individual tests or procedures, with bundled payments, a single fee is paid to cover the scope of services over an episode of care, which the act tentatively defines as beginning 3 days before hospitalization and continuing through 30 days following the patient’s discharge. Several health systems have already implemented such a payment scheme. For example, under Geisinger Health System’s ProvenCare, all services—preoperative evaluation through rehabilitation—associated with certain surgeries, such as coronary artery bypass surgery, are covered for up to 90 days following the procedure by a single payment, regardless of any complications that may occur. It is possible that this form of bundled payment could extend to gastroenterological care, such as the management of hepatitis C.
Coordination of Care
Another major area of focus in the Affordable Care Act is the coordination of care. The act sets the stage for the future development of ACOs. The ACO program is scheduled to go into effect January 1, 2012. ACOs are local networks of providers that are accountable for quality, cost, and overall health outcomes of a population of patients. They are voluntary networks that can be started by primary care physicians, hospitals, or other health care organizations; although specialists are not eligible to develop an ACO of their own, they will be allowed to participate. To achieve better coordination of care, it is widely anticipated that a greater emphasis will be placed on primary care and patient-centered medical homes. This, along with the expanded use of health information technology (HIT) and electronic health records (EHR) to improve care coordination, should lead to improved care at a lower cost.
What does the patient protection and affordable care act say about ACO s ?
In addition to extending coverage to millions of Americans through Medicaid and other mandates for health insurance coverage, the Affordable Care Act laid out mechanisms for the health care industry to reorganize to meet increased demand, improve quality of care, and lower costs.
In section 3021 of the act, the Center for Medicare and Medicaid Innovation was created to “test innovative payment and service delivery models to reduce program expenditures … while preserving or enhancing the quality of care furnished to individuals.” In other words, this new component of the Centers for Medicare and Medicaid Services (CMS) was given the significant task of selecting new models of payment and delivery of care aimed to maximize efficiency and quality of care.
Payment Schemes
ACOs are not a panacea but one of several complimentary initiatives within health care reform. Another area of health care realignment under the Affordable Care Act includes strategies for payment reform with reimbursement models that emphasize care for an overall population of patients. The act includes a provision that shifts payment away from fee for service and toward fee for performance or comprehensive payment, such as bundled or global payments. Fee-for-service payment has been targeted as fostering the application of unnecessary or wasteful testing and procedures that emphasizes quantity of care over quality, driving the hefty cost of health care higher. The act sets up pilot programs to test the suitability of bundled payment schemes.
Although the traditional fee-for-service method of payment allocates a predetermined sum for individual tests or procedures, with bundled payments, a single fee is paid to cover the scope of services over an episode of care, which the act tentatively defines as beginning 3 days before hospitalization and continuing through 30 days following the patient’s discharge. Several health systems have already implemented such a payment scheme. For example, under Geisinger Health System’s ProvenCare, all services—preoperative evaluation through rehabilitation—associated with certain surgeries, such as coronary artery bypass surgery, are covered for up to 90 days following the procedure by a single payment, regardless of any complications that may occur. It is possible that this form of bundled payment could extend to gastroenterological care, such as the management of hepatitis C.
Coordination of Care
Another major area of focus in the Affordable Care Act is the coordination of care. The act sets the stage for the future development of ACOs. The ACO program is scheduled to go into effect January 1, 2012. ACOs are local networks of providers that are accountable for quality, cost, and overall health outcomes of a population of patients. They are voluntary networks that can be started by primary care physicians, hospitals, or other health care organizations; although specialists are not eligible to develop an ACO of their own, they will be allowed to participate. To achieve better coordination of care, it is widely anticipated that a greater emphasis will be placed on primary care and patient-centered medical homes. This, along with the expanded use of health information technology (HIT) and electronic health records (EHR) to improve care coordination, should lead to improved care at a lower cost.
Overview of the ACO model
Qualifications
Requirements for starting an ACO include a formal legal structure responsible for the distribution of shared savings, a minimum of 5000 beneficiaries, an adequate number of primary care physicians to attend to this population, and submission of a 3-year plan. A proposed ACO would also have to prove their capability to promote evidence-based medicine, report on quality and cost data, implement HIT to manage EHR, and coordinate care among a team of professionals over the continuum of patient care.
If an ACO were accepted into the program, it would then be eligible to receive a percentage of Medicare savings per year if they met quality and cost-saving benchmarks. The benchmark would consist of how much it cost to pay for Medicare fee-for-service patients assigned to an ACO over the previous 3 years, on average. The ACO will receive between 50% and 60% of the savings if expenses are less over the agreement period and other quality measures are also met. However, if Medicare pays more than the calculated benchmark, then the ACO may be responsible for a portion of the loss. These quality and cost standards are still under negotiation, and recommendations from a range of interested parties regarding these measurements and the overall ACO structure are currently being considered.
Leadership
A key consideration for the development of ACOs is who will take the lead in forming them: hospitals or physicians? Although it is likely that both will take place, these different avenues would come with unique challenges and changes for the health care system in the areas that adopt them.
If hospitals are to take on the predominant role in forming ACOs, they need to shift focus away from the current business model of providing acute inpatient care, imaging, laboratory, and procedures to outpatient care, preventative care, and the overall coordination of care with the physicians they assume under their new health care model. The operational impact of decreased admissions, studies, and procedures on near-term revenue would likely subsume to more gradual long-term shared savings if the goals are met.
In areas where physicians take the lead in forming ACOs, there will be different challenges. Predominant among these would be a change in culture whereby long-standing competition among individual physician groups would have to succumb to a new mission of cooperation and collaboration. Furthermore, physicians may be resistant to a change in organization that would make them more accountable to oversight, require significant capital investment risk, and potentially lower their salaries because the anticipated savings that would come from better coordination of care would arise largely from avoiding tests, procedures, and hospitalizations. How to divide the shared savings among primary care physicians and specialists could also prove problematic.
3-Tiered Entry
Following the acceptance into the ACO program, not all groups would be equally prepared to immediately enter into the requirements because US hospitals and physician groups have varying levels of existing integration among practitioners, information technology capabilities, and other key factors necessary to fulfill the standards of a full-fledged ACO. Therefore, health policy specialists have proposed 3 levels of ACOs, and an ACO could enter the program at any of these 3 levels and proceed according to their assimilation to the new system.
Level I or shared-savings ACOs would bear no financial risk but they would be eligible for shared savings if they met specified quality measures and savings targets. At this stage, the entry-level organization would be responsible for establishing a legal and managerial foundation, reporting administrative data indicating performance measures, gathering a sufficient amount of primary physicians to serve a population of 5000 Medicare beneficiaries, and developing an infrastructure for adequately attending to primary, inpatient, and outpatient care.
Level II or partial-capitation ACOs would take on some risk for spending more than the prescribed benchmark but would also be eligible for a greater proportion of payback on savings. Although level I ACOs would likely remain on a fee-for-service payment scheme, level II ACOs might begin transitioning into bundled payments or other comprehensive payment arrangements. In addition to the requirements under level I, level II ACOs would be responsible for more detailed reporting of performance, including measurements of patient satisfaction and chronic disease outcomes, as well as more comprehensive financial reporting standards.
Level III or fully capitated ACOs would take on both the most risk and the most potential rewards. These organizations would likely already have an integrated model of care and sophisticated system of electronic health recording in place. At level III, an ACO would be paid in large part or even fully through capitation or bundled payments, with significant bonuses based on success. In addition to the level I and II requirements, these organizations would need to make elements of EHR and patient reports available for use by the public and health insurance agencies as well as even more comprehensive financial reporting. To reiterate, if the care provided by an ACO costs less than Medicare predicts, the ACO will receive a share of the savings as a bonus payment. However, the rule also includes financial penalties if an ACO misses its targets. ACOs will also be required to withhold 25% of any bonuses it receives as an escrow to cover future potential losses.
Although specific standards may vary, this 3-tiered plan allows for organizations at all levels of preparedness to enter into the ACO track and progress as they gain the infrastructure, skills, and experience to take on a greater role. This point is important because not all regions would be equally prepared to begin operating as ACOs because of the lack of collaboration within existing health care markets coupled with the few hospitals and physician practices with adequate HIT in place, which are essential core requirements.
Related posts:
Impact of Health Care Reform on the Independent GI Practice
Electronic Medical Records and the Gastroenterologist
A Letter to Fellows: Transitioning From Training into Practice in Uncertain Times
Medical Practice Integration: Going Big in Private Practice
The Gastroenterologist and Industry: Changing Winds
Demonstrating Value: Registries and Beyond
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