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Three reasons why accountable care organizations are not likely to go away

There are more than 450 “accountable care organizations” (ACOs) in various stages of development or operation today. ACOs are among the most significant elements of the Affordable Care Act (ACA), directly impacting how doctors, hospitals and allied health professionals relate to each other and to payers—health insurers, employers, Medicaid and Medicare.

According to the Centers for Medicare and Medicaid Services (CMS), ACOs “are groups of doctors, hospitals and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients. The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.”

ACOs were not a new idea in 2010 when they were included in the ACA. Elliott Fisher, Director of the Center for Health Policy Research at Dartmouth Medical School coined the term in 2006 in discussions with the Medicare Payment Advisory Commission. But before that, the concept of “risk-based contracting with groups of doctors and hospitals” had been around:

  • In the 1970s, Health Maintenance Organizations (HMO) contracted with providers through staff, group and Independent Practice Association models.
  • In the 1990s as capitation gained momentum, it was the central feature in a new sector that emerged—physician practice management—that premised its value proposition around the notion that larger, organized groups of physicians with the infrastructure and access to capital could successfully take performance risk and manage their own financial destiny sans subordination to a hospital or health plan.
  • In the Medicare Prescription Drug Improvement and Modernization Act of 2003, the precursor to the ACO was included—the Medicare Physician Group Practice Demonstration and the Medicare Health Care Quality Demonstration, testing the viability of risk-based contracts as a replacement for fee-for-service (FFS) Medicare.

Given these precedents, in 2010, ACOs were included in Sections 3021 and 3022 of the ACA alongside bundled payments, medical homes, increased transparency about quality and prices and restrictions on physician self-referral, reflecting intent to fundamentally change how care is delivered and paid for.

Since the ACA’s passage, CMS has made several waves of announcements regarding ACO participation, including the announcement of 32 ACOs in December 2011, 27 in April 2012, 87 in July 2012 and 106 in January 2013—all focused on managing Medicare populations. And more than 200 others have been established to target other populations—direct contracts with larger employers including the hospital’s employees, Medicaid and commercial members. No one knows for sure how many non-Medicare ACOs there are, but it’s clear the numbers are increasing. Last week, CMS announced mixed results for the first year of the Pioneer program (2012): of the 32 in the pilot, nine have indicated they’ll discontinue their participation citing risk and most did not achieve the savings targets originally anticipated. And the non-Medicare ACO efforts are just starting, so time will tell.

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by Paul Keckley, Ph.D., Executive Director

Deloitte Center for Health Solutions


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