If you move away from FFS, you might be an ACO

February 1, 2011

What is one thing everyone wants even though no one knows exactly what it is? An accountable care organization.

Providers of all kinds who collaborate on any level are now tempted to label themselves as ACOs, especially if they partner with payers on quality-based payment processes. The concept might eventually turn into a rule-out model. In other words, if you can rule out fee-for-service as a sole payment method, you might be an ACO.

The federal government expects such organizations to have well defined quality guidelines, coordinated care and a commitment to a discrete group of Medicare seniors. While improvement of care delivery is the ultimate goal, designing infrastructure to make that happen is the prerequisite.

Congressional Budget Office estimates say Medicare's cost savings from ACOs could reach $1.2 billion annually. Add to that the general wave of commercial payers that will demand similar accountability for their members, and savings could be substantial for the system overall. Private payers are concerned, however, that trial and error in Medicare payment methodologies could result in (even more) cost shifting.

Providers want flexibility and control, plus generous payments. If they're taking on more risk and responsibility, they want their participation to be voluntary and without penalty for opting out. Yet, a timid commitment could result in more silos. And what then will be the default? Fee for service.

ACOs won't supplant fee for service entirely, but they would create incentives for quality, prevention and coordinated care, which providers wouldn't have otherwise.

PricewaterhouseCoopers identifies several ACO model types:

Infrastructure ACO-Providers build a network and infrastructure such as IT, practice guidelines and data analytics.

Pre-ACO-An integrated delivery system with infrastructure to manage populations and the ability to manage risk.

Commercial ACO-A commercial payer contract with some level of risk sharing and quality requirements.

CMS Shared-Savings ACO-An organization of providers accountable for cost and quality for a group of Medicare beneficiaries designated by the Centers for Medicare and Medicaid Services (CMS).

While the CMS model will need to meet the regulatory definition, the other types likely won't require any formal designation.

Employers are onboard with the idea, too.

According to the Midwest Business Group on Health, about half of all employers say they want to see ACOs developed. Sixty percent want to replace fee for service with bundled payments, and more than half want to continue driving medical home models, which lend themselves to ACO activities.

The challenges between here and there are plenty. According to the Center for Studying Health System Change, even sophisticated provider organizations find changing their care delivery a demanding ordeal. Such change requires substantial financial and time investments.

Just starting up requires funding, appropriate staff productivity during implementation, and a sustainable infrastructure to support future improvement. And perhaps the most pressing issue is that we have less than one year until the official ACO launch date.

Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at julie.miller@advanstar.com