Are Accountable Care Organizations, ACOs, the Business Model for Healthcare of the Future? - Health Minute for March 26, 2013

Mar 27, 2013 8:45 AM ET
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ACO—that’s the latest acronym to add to the growing list of health-related terms that you need to know. ACO stands for Accountable Care Organization, a payment and care delivery model that links provider reimbursements to quality metrics and reductions in the total cost of care for a specific population of patients. This new term is really new: it was first used in 2006 during a public meeting of MPAC—that is, the Medicare Payment Advisory Commission. In 2009, it was included in the PPACA—that is, the Patient Protection and Affordable Care Act, sometimes called “Obamacare.”

An ACO resembles an HMO—that is, a Health Maintenance Organization (HMO). Like the HMO, the ACO will be ‘held accountable’ for providing comprehensive health services to a specified population. What does all this mean in real terms? One major ACO, Kaiser Permanente, has been named as the model for future health care in a recent New York Times article.

Kaiser Permanente combines a nonprofit insurance plan with its 37 hospitals and clinics and 17,000 salaried doctors, creating a holistic health system. The organization also uses sophisticated technology and electronic records to manage care. Because the plan is paid a fixed amount for care per member, there is a strong financial incentive to keep people healthy and out of the hospital. This integrated model is so clearly sensible that hundreds of ACOs are now being created throughout the country. Hospitals are buying physician practices or partnering with doctors and health insurers to form ACOs as a way of controlling more aspects and the costs of patient care.

One benefits study concludes that costs could be lowered as much as 10 percent where an ACO controls all the providers. However, a recent study by the MGMA—that is, the Medical Group Management Association, shows that the implementation of ACOs is one of the toughest challenges facing its members. Getting its clients to in-system providers, coordinating gigabytes of patient data, and scaling up such a large, radical program are the big issues. In my humble opinion, it’s a sound, innovative business model if we are to have better health care at a lower cost in the future. 

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