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In an ACO, Who's Accountable?

Philip Betbeze, for HealthLeaders Media, April 14, 2011
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If the accountable care organization becomes the dominant way healthcare is organized in the future, providers will likely face the wrath of both the public and the pundits under ACOs. That will come later, but it is inevitable because one of the chief priorities of ACOs concerns limiting utilization—the same role HMOs once filled.

Under the current payment system, hospitals are the hub of the healthcare experience. They do the most expensive procedures, but generally, their responsibility to the patient ends at discharge. Beyond broad regulations focusing on readmission rates and quality scores, the new healthcare reform law includes demonstration projects that provide incentives and, notably, penalties for providers if they do a poor job of coordinating care. That means if ACOs become the dominant reimbursement structure, communication and handoffs between the hospital and ancillaries, including ambulatory care, surgery centers, primary care providers, the pharmacy, even hospice, will become especially important.

Central to the ACO concept is the idea that patients deserve to have their care coordinated such that one entity giving a service to the patient has all the information about what has been done for that patient elsewhere in the continuum, and then takes that information into account when treating that patient. Such a model helps remove some of the waste in healthcare due to duplicative care, and also makes some entity responsible—through shared payment—for not only distributing that payment equitably among entities involved in the episode of care, but taking responsibility that the patient will not have to seek care to rectify a health problem that should have been addressed during the episode. But who, or what, should that entity be?

It doesn’t necessarily have to be the hospital. In many cases, it will be, but other organizations, most commonly health plans and large multispecialty physician practices and medical service organizations can also serve as the “accountable” party in the ACO.

What is an ACO?

It’s a legitimate question. Several organizations, including CMS, have demonstration projects or independent trials going on right now, with dozens of organizations spending real money to try to figure out how to compete in a new reimbursement paradigm. But they clearly haven’t figured out how transform an idea that makes common sense into one that makes business sense.

On its face, the ACO is a simple structure. It has two functions. Most important, says Michael Sachs, chairman and CEO of Sg2 Inc., a Chicago healthcare information company, it manages utilization. A distant second priority, when utilization of a service is to take place, is to find where it can be done most efficiently.

“Whatever the unit of service is, you want to reduce it,” says Sachs. “Whether I buy the procedure at $4,000 or $5,000 isn’t terribly significant. It’s whether the procedure is done at all.” He offers, as an example, visiting two different auto body shops and having them compete on the service. You may save by shopping around, but the big point is: Did you get in the accident?

“People always want to go straight to the second element, but that’s not where the savings are going to be and where the real innovation is,” he says. Instead, savings will revolve largely around new models of care, which is where the bigger payoff lurks. He mentioned that over the past 30 years, “whenever there’s been a preauthorization put in front of the utilization of the service, utilization has decreased.”

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1 comments on "In an ACO, Who's Accountable?"


Carol Stevenson (4/20/2011 at 1:26 PM)
Philip, kudos on a well-written article. This is one of the first articles I've read that really explains how ACOs are expected to work. Nicely done.