The Medicare ACOs are expected to save the program $960 million over the next three years.
Under the current fee-for-service system, if a health care worker provides a service covered by Medicare, they can be paid for it regardless of whether a cheaper service, or no service at all, would have sufficed. Health care providers are typically not held accountable for the cost of their services under Medicare, employer-provided or private insurance.
Accountable Care Organizations will attempt to change that fee-for-service system by tying pay to performance, both in terms of patient care and cost efficiency.
Dr. Glen Stream, president of the American Academy of Family Physicians, says the timing is right, and Medicare is the place to begin.
"Part of the initial emphasis on Medicare is that the government has direct control over those as the payer and can implement change on a shorter timeline," he says. "Not only is there a sharp increase in retirees with the aging baby boom generation, but we're living longer and with more chronic illness for which there is treatment. But the treatment is expensive. It's key to find the most cost-effective treatments and delay and prevent as much chronic illness as we can."
Doctors, hospitals and caregivers who voluntarily form an ACO will work together to coordinate care for their patient population. ACOs that apply to the federal program should serve at least 5,000 patients and must include health care providers, suppliers and Medicare beneficiaries on its governing board. If the ACO meets the government benchmarks for cost savings and quality of patient care, it will share in the money it saves Medicare.
Private-sector push for ACOs
Although the federal ACO initiative is just beginning, you may already be an ACO patient without knowing it, according to Robert Zirkelbach, spokesman for America's Health Insurance Plans, or AHIP, a trade group that represents the health insurance industry. AHIP currently tracks 30 ACOs developed by eight commercial health insurers to date.
"There is a tremendous amount happening in the private sector across the country where health plan providers are partnering to change payment models and develop ACO-type arrangements," he says. "We've provided a lot of feedback on how the (federal) program can capitalize and build on what's happening in the private sector. The ideal situation would be where Medicare can incorporate its patients into these existing initiatives and expand on them."
One such collaborative accountable care program was launched by Cigna in 2008. In this case, it's the health insurance company, rather than Medicare, that provides the financial incentive for the participating physician groups to improve patient care and reduce costs.
"The physician groups get their bonuses if they improve the quality and they lower the costs," says Cigna spokesman Mark Slitt. "If they just cut costs, that's not enough; the quality has to be there."
A health insurance company is uniquely positioned to provide the electronic data essential to getting the most out of an ACO.
"For instance, we know when a patient has entered or is being discharged from a hospital because we get claims data, whereas a primary care doctor may not even know that their patient has gone to the hospital," says Slitt.
A key new position in the ACO model is the designated care coordinator, often a registered nurse in the physicians group, whose job is to receive, interpret and act on the data being shared by the other ACO partners.
"We can send data to the physician practices saying, 'Here are patients of yours that are being discharged from the hospital, and based on algorithms and predictive modeling, we think this particular group of people may be at high risk for readmission,'" says Slitt. "The care coordinator then makes outreach calls to those patients to ensure that they get the follow-up treatment they need and are taking their meds properly."
Slitt says early results are encouraging. Cigna has 11 collaborative accountable care programs up and running with another 20 slated to launch in 2012.
"It's in everybody's interest for these things to work," he says. "When you have better health, you require fewer hospitalizations, fewer trips to the ER, and there's a benefit to the employers who are paying for the health insurance by having a healthy, productive workforce. Ultimately, costs come down because people are consuming less of those expensive hospitalizations and ER visits. It's a win-win all around."