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Accountable Care Organizations

Officially introduced in the Affordable Care Act in 2010, Accountable Care Organizations aim to support the industry’s goal of improving the quality of delivered care and patient satisfaction while reducing care costs. Their number has been growing strongly since the Act was signed. At the beginning of 2011, there were 58 ACOs across the country. In 2018, this number was already 1011. According to the Health Policy Journal, ACOs served nearly 2.4 million (6%) Medicare beneficiaries in 2011. In 2014, ACOs (including private ones) covered more than twice more beneficiaries, approximately 14% of Americans.

ACO performance is promising, though its long-term impact on the industry is yet to be seen. This strategy has proved to be effective in promoting the industry’s shift from fee-for-service toward value and outcome-based care. In 2016, the Medicare Shared Savings Program managed to achieve an average overall quality score of 95% and generate more than $650 million in gross Medicare savings. Blue Shield of California with its ACO provider managed to save up to $325 million over the last 5 years by reducing hospital admission and emergency room visits (number of hospital stays dropped by 13%, while the length of stays decreased by 27%).

Answering the question “What are accountable care organizations?” requires defining the concept of managed care that existed in the US since the early 1980s. The model has been largely unaffected by the Act in 2010. Despite some similarities, there is a difference between Accountable Care Organizations vs Managed Care Organizations in US healthcare.

types of accountable care organizations

What Are Accountable Care Organizations

Though ACO was intended to act as an extension of the Act for Medicare patients, now the number of commercial payers and private entities who want to participate is growing. By definition, such organizations are networks of care providers, clinicians, physicians, and payers contracting with each other voluntarily to coordinate the care of the assigned population. This creates a professional environment where specialists can share their best knowledge and enhance communication across the care continuum, resulting in better treatment outcomes and the quality of delivered care. However, an accountable care organization’s benefits are not limited to this. ACOs allow participants to be more financially successful by sharing incentive payments that are tied to quality and treatment outcomes. Keeping their costs below the financial benchmark set by the payers and complying with the quality standards, practitioners may earn and share all the savings they have accumulated. Unlike the described “upside” risk model, in the “downside” risk arrangements, participants may have to repay the financial losses (all or a portion) if actual costs exceed the target.

Among these two types of accountable care organizations, the downside type is fairer. Payers and authorities would like to push more organizations into contracts with the downside risk, where financial responsibilities spread more evenly.

Though care spendings drive the industry for changing payment systems, there are different concepts behind each system. The managed care model was created before the ACO care management. At first glance, the Act of 2010 did not bring any changes to it. Managed Care Organization is also a network of providers and practitioners working together to reduce care costs. In MCOs, providers usually receive fixed payments that are determined by payers. However, unlike the Accountable Care Organizations model, MCOs do not encourage providers to bring down costs by generating better care outcomes and complying with quality standards. Excessive focus on profit in MCOs may force providers to search for ways to keep costs under the limits, set by payers. This may encourage practitioners and providers to skimp on care, rather than improve its quality.

accountable care organizations

Accountable Care Organizations Model

Pioneer Program was the starting point for providers to begin participating in ACOs in the beginning of 2012. Under this voluntary model, providers could share savings if they reduced care costs and met the standards, but they were also required to pay their overage if spendings exceeded the target.

Several months later, the Medicare Shared Savings Program (MSSP) was launched and became the permanent voluntary program. By 2018, 561 ACOs coordinated the care of more than 10 million Americans. In Track 1 (prevailing type), ACOs can share savings if their quality scores are high enough (upside risk). In Track 2, ACOs may receive a bigger portion of savings than in Track 1, but they are also required to pay if they exceed the limit (downside risk). Over time, MSSP ACOs showed better quality measures, from a score of 84% in 2014 up to 95% in 2016. Though ACOs managed to achieve reduced care costs, their total reward payments exceeded the amount of savings. It resulted in the creation of Track 3 (similar to Track 2 but with a higher portion of savings/losses to share) and encouragement of downside risk contracts.

Advance Payment ACO was designed to assist with program implementation and infrastructure in rural areas. Under this program, organizations received support from the authority (up-front payments). ACO Investment model replaced the Advanced Payment model, after its finishing in 2015.

In 2016, the government introduced the Next Generation ACOs model that follows the Pioneer Accountable Care Organizations but is more flexible and offers multiple options of risk and reward arrangements.

benefits of accountable care organizations

Benefits of Accountable Care Organizations

One of the obvious benefits of accountable care organizations is that they promote better care quality at reduced costs shifting the risk to providers. Basic concepts of quality improvement in the healthcare industry include: 

determining care gaps; improving care outcomes without losing focus on what is important for a patient (ensuring a high level of patient satisfaction); adopting technology to coordinate care, assess, and analyze patient data. Authorities encourage preventative care and population wellness instead of “sick care”. In other words, by improving population health through better post-acute and preventive care, providers may receive more incentives. 

There are some other advantages of accountable care organizations over other models, such as enhancing technology implementation to practice and leveraging electronic patient records to make care outcomes better. Collaboration between the Arizona Care Network (ACN) and Solve.Care, a leader of blockchain technology solutions for healthcare, demonstrated how technology can improve outcomes and lower the administrative burden on physicians. Dr. David Hanekom, President for North America and Chief Medical Officer of Solve.Care, former CEO Arizona Care Network, said that Solve.Care is driving a transformation in healthcare delivery, finance, payment, and information sharing. “Blockchain is going to help us take those administrative processes that intrude on the relationship between the patient and the physician and free them to do what they are trained on, which is to deliver healthcare to humans and not do administrative tasks,” Hanekom said. “Without provider satisfaction, we can’t drive better patient care, lower costs and more satisfied patients.” In 2019, the ACN won an Innovation Award for its collaboration with Solve.Care.

ACO management

Pioneer Accountable Care Organizations

Despite the criticism and existing problems with accountable care organizations, they are the most popular and most successful strategy to date. The Pioneer ACO Program, which was the first ACO program, operated from 2012 till 2016, covering 269,528 beneficiaries by 2016. In the first year of the program, gross care costs were reduced by $280 million. Net spendings (after deducting bonus payments) dropped by 4-5%.

ACO management is maturing, and the results are yet to be seen in the long-term run. However, the work being done now to improve care quality and communication between professionals is already having a lasting impact on the industry and care perception.

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