ACOs: Putting health care on a budget

Payers are eager to put health care on a budget.

Accountable care organizations (ACOs) are groups of doctors, hospitals, and other health-care providers that come together voluntarily to give coordinated, high-quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health-care dollars more wisely, it shares in the savings it achieves for the Medicare program.

ACOs spread swiftly. In spring 2013, 52 percent of U.S. patients lived in primary-care service areas served by ACOs, compared with 45 percent just six months earlier. About 30 percent lived in areas served by two or more ACOs, which was double the rate six months earlier.

However, ACO expansion seems to have lost some steam. After the Centers for Medicare and Medicaid Services announced 106 new Medicare ACOs in January 2013 alone, only 35 new commercial ACOs were announced in the subsequent 10 months.

David Muhlestein of Leavitt Partners, which tracks ACO formation, said there were several reasons for the slowdown. He said there is a lack of widespread acceptance of the model by commercial insurers, and there is no clear model for success. He said many organizations are waiting to see if ACOs renew their contracts with commercial payers, which would signal whether they are succeeding.

Nonetheless, ACOs are expected to be the most prevalent value-based model for health plans, according to Availity Health Information Network.

The report surveyed respondents on their strategy for adopting value-based models such as ACOs, PCMHs, payment-for-coordination, pay-for-performance for physicians and hospitals, and bundled payments. Nearly 9 out of 10 health-plan executives said they either had implemented or were planning to implement an ACO in the next 12 to 18 months. They also planned to automate information exchange with physicians in the same time period to implement or expand VBP.

More than half of physicians say they are skittish about entering into Medicare-based ACO agreements with the ever-looming SGR, according to a survey by MGMA. However, most said they would be much more likely-–or somewhat more likely—to consider new payment models if Congress passed legislation that would stabilize Medicare reimbursement for five years.

Nearly 2 out of 3 physicians surveyed by athenahealth and physician social website Sermo said the shift to ACOs would diminish quality of care, and that such quality generally will deteriorate over the next five years.

Physicians who said they were willing to participate preferred a pay-for-performance model to bundled payments and shared savings agreements. Of the specialties, nearly 3 out of 4 anesthesiologists said they were willing to participate, compared with less than half of emergency-medicine physicians. Pay-for-performance is an umbrella term for financial incentives to improve quality and efficiency of care and patient outcomes.

The number of physicians participating in ACOs or planning to do so has tripled between 2012 and 2013, according to Medscape’s 2013 Physician Compensation Report.

In 2012, 8 percent of the nation’s physicians were either in an ACO or planned to be in one within the year, according to the 2012 survey. This year, 24 percent of respondents are in an ACO or plan to join one within the year.

About 4 out of 10 physicians are unwilling to participate in an accountable care arrangement, according to a survey by, a physician-staffing firm.

Paul Ginsburg, president of the Washington-based Center for Studying Health System Change, said physician-led ACOs could have more opportunities to create savings in patient care if health insurers cooperate.

“I think physician-led ACOs inherently make markets more competitive because they have an opportunity to shift patients toward higher-value hospitals,” Ginsburg said. “It means that a hospital market that might not have large competition going, all of a sudden, if there’s a physician-led ACO, those hospitals have to compete on price for the allegiance of those physician-led ACOs.”

Ginsberg pointed out that doctor-led ACOs are not compromised financially by reducing hospital admissions and emergency department visits.

Physician-led ACOs dominate

The number of physician-led ACOs has surpassed the number led by hospitals.

Of those choosing to start ACOs, physicians—and specifically independent practice associations—are increasingly taking the lead. The reason is incentives. Physicians can increase their incomes under shared-savings programs. Hospitals lose money when they strive to keep patients healthy and out of the hospital.

Regardless of whether physicians participate in ACOs, they should prepare for the changes ACOs could bring to practice patterns. According to medical publisher, there are five ways ACOs will affect nonparticipating physicians:

  • Expect a reduction in referrals at specialty practices.
  • Get ready to deal with an ACO if you are a primary-care provider, because many specialists will be part of ACOs.
  • Prepare to compete for patients based on customer service, because ACOs will be motivated to keep patients within their networks.

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