Are ACOs the Answer?

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Mike Cassidy

By Mike Cassidy

It may seem contradictory that Accountable Care Organizations (ACO) are championed as the new answer to manage more efficiently (i.e. improve quality and reduce costs) when the most popular form of ACOs, i.e. the Medicare Shared Savings Program, established in 2010 as a component of the Patient Protection and Accountable Care Act has yet to launch a single ACO.  In fact, the regulations have just recently been finalized, and CMS is just now beginning to receive applications to participate in the Medicare Fee for Service Program as an ACO.

The ACO concept is probably misunderstood because there is no generally accepted definition.  Many people think of ACOs as the legal entities that will participate in the Medicare Program, but the term is generically being applied to many types of health care delivery systems.  Perhaps the simplest definition is one coined by Mark McClellan, who describes an ACO as “an organization seeking per capita improvements in quality and costs.”

While CMS has been developing the regulations for the Medicare ACO program, generic ACOs are already up and running, and in some cases have been for quite a few years.  A recent study by Leavitt Partners indicates that there are 164 identified ACOs across the country.  Of those, 99 are primarily sponsored by hospitals, 38 by physicians’ groups and 28 by insurers, and they tend to be developed in higher income and more populated areas of the country.  In fact, a majority of the ACOs are identified as being headquartered in only eight states, with California having almost twice as many as the next highest states.

The Leavitt Partners study reaches the following conclusions:

1. Dispersion of ACO varies significantly by market;

2. Certain regions of the United States are devoid of ACOs, i.e. the poorer and rural regions in particular;

3. Hospitals and hospital systems are the primary backers of ACOs;

4. Significant investment in the accountable care model exists independent of the Medicare Shared Saving Program; and

5. The success of different accountable care models is yet unproven.

I think it is fair to state that there is almost universal agreement that higher quality and more efficient care cannot be developed in areas where the major health care providers are primarily compensated on a fee for service basis.  It is interesting to note, as pointed out by a recent article in the Pittsburgh Post Gazette that, in an area dominated by a major hospital system and a major insurer, where you would think that integration would yield more efficiencies, the Western Pennsylvania area has the highest number of hospital beds and the highest utilization rate of any of the metropolitan area included in the study reported on by the paper in the December 4,2011 article.