Elliott Fisher, director of the Center for Health Policy Research at Dartmouth, is credited with coining the term Accountable Care Organization (ACO). Yes, we have him to thank. Back in 2006, he used it for the first time during a public meeting of the Medicare Payment Advisory Commission (Medpac) and, as they say, the rest is history. The term took immediate hold of congressional Democrats and became famous when it became part of the Affordable Care Act (PPACA) signed by President Obama in 2010. In fact, CMS is under the gun to create an ACO “program” by the end of this year, so the pressure is being felt by providers who are uncertain of the “opportunity.”
The ACO is an entity charged with delivering comprehensive care to a defined population of fee-for-service Medicare patients. Taken from the PPACA — Section 3022: “The ACO shall be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it.”Accountability for such quality improvements will be measured by subjecting participating ACOs to report cards. The better the grade you get, the bigger the savings share back and the more profitable the arrangement might be.
It’s said that if you look up the definition of an ACO, you’ll see a picture of an HMO, but there are differences. For example, unlike HMOs, ACOs can be much smaller, possibly as few as 5,000 Medicare beneficiaries (the minimum number according to PPACA’s Section 3022). And unlike HMOs, patients will be “assigned” to the ACO by the HHS Secretary, based on a formula that hasn’t yet been defined. Also, ACOs will not have any insurance risk, at least not at the onset, but that will change at some undecided point in the future. How that risk will shift back to the ACO and alter the “shared savings” model is another question that hasn’t been answered.
In fact, the “shared savings” section of the PPACA reads like a list of general recommendations: “ACOs should have a strong base of primary care. Hospitals should be encouraged to participate, because improving hospital care is likely to be essential to success.” Most of Section 3022’s provisions describe capacities ACOs must have in order to qualify; they describe general reporting expectations for compliance; and they describe the metrics that will be used for measuring performance. Without belaboring the point: lots of directional advice — great ideas — a genuine shortage of confirmed answers: and some gaping omissions.
And for better for worse, that lack of certainty is already shaping the ACO market.
President Obama specifically cited the Mayo Clinic, the Cleveland Clinic, Intermountain Healthcare and Geisinger Health System as high profile and respected providers who he believed would set the ACO example for the industry. But very recently, this gang of four have declined to even apply for the “Pioneer Program,” tailor-made by the Obama administration to further reward “first movers.” Along with 400 other large provider organizations, these four declined via a letter sent by the American Medical Group Association (AMGA) that basically said, “thanks but no thanks.” The letter cited all the reporting requirements, financial disincentives and “general ambiguities” as the source of their concern and lack of interest.
For the record, GPOs seem beautifully positioned to drive the ACO model for their members who are considering it. Because data infrastructure and reporting capabilities are super-critical, many GPO customers should be sitting pretty by now. In an ACO context, all of that data collection and sharing of clinical information has a renewed purpose — it’s how you get paid. Premier members come to my mind as ready-made for quickly forming the kinds of ad hoc networks with consolidated reporting required of ACOs and envisioned in the PPACA.
Having mentioned the insurance problem (shifting liability) earlier in this post, it’s interesting to note the potential solutions that could be enabled by GPOs. When the insurance burden shifts back to the ACOs, small, medium and large ACOs will be able to band together and get large enough to manage their insurance risk. GPOs should be able to look across their membership(s) in much the same way that financial managers optimize/balance risk in their portfolios. They could be marvelous facilitators. Let’s put it this way — if they’re allowed — there is no question in my mind that GPOs and their providers will find ways to drive insurance costs down. I believe that if for no reason other than the fact that the insurance industry has already started expressing its unhappiness at these early signs of potential consolidation among providers. The insurance industry is already complaining about it to HHS and to anti-trust authorities.
– Tom Finn
