The Pros and Cons of Accountable Care Organizations
Our healthcare system is undergoing constant change and there are always new technologies being introduced to increase efficiency for physicians and to improve medical care for patients.
This innovation and creativity is a good thing. New software and hardware, as well as diagnostic, screening, and billing technologies promote healthy competition and make the medical field better. These technologies also increase efficiency and cost control while providing value for both patients and health care practices. After all, no industry ever improved by remaining stagnant.
Thanks to America’s transition away from traditional fee-for-service (FFS) models, an increasing number of clinics and hospitals are implementing an accountable care organization or ACO model. The purpose of an accountable care organization is to provide value to patients. Instead of doctors trying to see as many patients as possible, ACOs encourage high-quality care, reduced waste, and better health outcomes for patients.
The Value-Based Payment Structure
An ACO is a group of physicians, hospitals, and other care providers who come together voluntarily to provide coordinated high-quality care to their patients. ACOs hold providers jointly accountable for the health of their patients by giving them incentives to cooperate and save money through avoiding unnecessary tests and procedures.
There are several models of ACOs, both private and public, but the majority of them are part of the Medicare Shared Savings Program. Primary care practices can band together to form an ACO, or they can join forces with larger hospitals, integrated delivery networks, and in some cases even insurance companies.
Accountable care organizations are usually federally backed and encourage voluntary participation. For organizations and practices that can successfully implement and operate an ACO, the potential benefits are huge. In Medicare’s traditional fee-for-service payment system, physicians and hospitals are paid for each test and procedure performed. This can drive up costs by rewarding providers for doing more, rather than rewarding providers for better outcomes that results in fewer procedures. ACOs don’t do away with fee-for-service payments, but they create an incentive for providers to be more focused on outcomes and less concerned with procedures by offering bonuses for keeping costs down.
In addition, physicians and hospitals must meet specific benchmarks, with a focus on quality care, prevention, and carefully monitoring patients with chronic diseases. In essence, providers get paid more for keeping their patients healthy and out of the hospital. The preliminary results show an improvement in quality of care, with savings overall for patients, although the models are still evolving.
3 Key Needs of Accountable Care Organizations
Any successful accountable care organization has three key needs.
- Acceptance among clinical staff including an acknowledgement that the ACO delivery model requires changes and adjustments.
- An understanding of the needs of the population and the interventions required to improve the outcomes needed.
- The ability to track, communicate, and share information across the rest of the accountable care organization through technology.
Whether a practice joins an ACO or not, they should at least be knowledgeable about its existence and its place in the healthcare landscape. There are several pros and cons for providers when it comes to deciding if they want to participate in an ACO. Let’s take a closer look at some of the benefits.
The Benefits of ACOs
Bonus payments can be significant
The Center for Medicare and Medicaid Services distributed approximately $2.3 billion in performance payments to accountable care organizations in 2020 thanks to the Medicare Shared Savings Program (MSSP). Participation in the organization does not guarantee a bonus in and of itself, but Cigna did report that from 2008 through 2016, its accountable care program had $424 million in savings and a return on investment of 2-to-1.
ACOs bring practices closer to patient-centered care
Nearly every accountable care organization is showing continued improvement when it comes to quality of care. And practices that meet Medicare’s ACO benchmarks will likely improve care for patients not previously covered by Medicare. As these practices change how they deliver care, they take on additional contracts that have value toward eventual bonus payments.
ACOs provide better quality care at a lower cost
ACOs are focused on providing quality outcomes while also reducing costs to payers and patients. Under ACOs, only necessary tests and procedure are ordered for patients. Reimbursement is based on quality rather than quantity. With the emphasis on coordination of care, providers can easily check to see which tests and services have previously been performed for a patient, thus reducing duplication.
ACOs support independent practice
If you enjoy the independence that your practice brings and would prefer not to be part of a broader system, the accountable care organization structure can be an incentive to remain solely sustainable. Joining an accountable care organization allows physicians to access increased benchmark data that gives their practice the chance to analyze their progress on cost and quality measures. ACOs can be an attractive option for physicians looking to retain their independence while benefiting from collaboration with others delivering patient care.
Despite all of these positives, accountable care organizations also have some downsides.
The Downsides of ACOs
ACOs mean retooling your business.
When you become part of an accountable care organization, you may have to adjust your established practices to become more focused on quality and cost savings, because an ACO is a value-based payment system, rather than the more common systems based on the volume of patients seen on a daily or weekly basis. This can be challenging for hospitals and physicians whose practices are designed around the fee-for-service system, because the basic purpose of ACOs is to reduce hospital stays, emergency room visits, and specialist and testing services—all ways that hospitals and physicians make money in the fee-for-service system.
ACO costs can be prohibitive
The startup costs involved with joining an ACO can be prohibitively expensive for small practices, ranging into the millions of dollars. This depends, of course, on the size of the practice, as well as the practice’s geographic location and the infrastructure it already has in place.
If your practice hasn’t gone digital yet, you’ll need to invest in the hardware and software needed to support an EHR. You’ll also need to have a health information exchange (HIE) system in place so that you can safely share patient information with other providers. Practices must also invest in care and disease management programs, which are particularly important for patients with chronic diseases. These costs can add up to millions of dollars, which explains why many ACOs are small practices joining with large hospitals that have greater resources, with available software and systems in place.
ACOs are expected eventually to take on downside risk.
As ACOs have emerged as one of the most broadly implemented value-based payment models, the Center for Medicare and Medicaid Services has been pushing ACOs to take on more financial risk. CMS has designed a six-year Medicare Shared Savings Program ramp-up in which participants can gain the experience that comes with being part of the program, meaning they have the shared savings, but they also have the risk of losses. Ultimately, if an ACO is unable to reduce the cost of patient care, there will be no savings to share. This can adversely affect an ACOs operating budget. Even worse, an ACO may have to pay a penalty if it doesn’t meet certain quality and cost-saving benchmarks.
Considering the Transition to an ACO?
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