Print this page

Preparing for Accountable Care Organizations

The Patient Protection and Affordable Care Act (PPACA) mandates that the Secretary establish a shared savings program that promotes accountability for a patient population, coordinates items and services under Medicare Part A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery. The goal of the creation of Accountable Care Organizations is to reduce healthcare costs while improving the quality of patient care, and at the same time increase efficiency in the delivery of that care.  An Accountable Care Organization (ACO) pilot will be established and administered by the Centers for Medicare and Medicaid Services (CMS).  CMS' deadline, as mandated by PPACA, to unveil its pilot program is now less than a year away, or January 1, 2012. Participation in the pilot will be for a period of at least three years.

CMS defines an ACO as a network of healthcare providers, physicians, and/or hospitals that are jointly accountable for the quality, cost and overall healthcare of Medicare fee-for-service beneficiaries.  The PPACA provides for certain eligibility requirements for ACO's.  The primary requirement is an ACO shall include a number of primary care physicians that are sufficient for the number of Medicare patients assigned to it, with a minimum of 5,000 patients.  ACO's will be allowed to participate in the Shared Savings Program, and receive incentive bonuses based on the ACO's performance, compared to cost benchmarks specific to the ACO as well as quality benchmarks. The legal structure of each ACO must be such that it can both receive and distribute these shared savings.
 
Healthcare organizations planning on becoming a part of an ACO should quickly begin developing a model, to be implemented in phases, before full implementation occurs. It is not as easy as aligning primary care physicians and other specialists with hospitals in an attempt to reduce costs, by being "accountable" for the entire continuum of patient services.  Major problems include how to ensure the ACO will provide all services needed by patients in the network, along with the infrastructure requirements needed to integrate patient care among different providers in the ACO.  Some of the key questions that must be addressed include:

• What is the appropriate mix of physicians and specialists the ACO will need in order to best serve its patient population?
• How will the various provider types and physician specialties integrate efficiently into the ACO network?
• What should our IT infrastructure look like as the ACO attempts to collect and disseminate a patient's information through the pipeline of the ACO, and who bears the financial responsibility of this infrastructure?

An enormous amount of thought will have to be placed on the risk-benefit matrix.  Risk factors to  consider include insurance risk from capitated payments, risk from potential of decreased revenues, and misalignment risk from not properly rewarding each provider in the ACO for improvements in care delivery. Other issues to be considered include the potential for greater than expected startup cost and high IT infrastructure costs and the overarching question - Will the ACO really work as intended?

The best strategy may come from following the results of CMS' Physician Group Practice (PGP) Demonstration, mandated by the Medicare, Medicaid, and SCHIP Benefits Improvement and Protection Act of 2000. This demonstration involved 10 large physician group practices, and ran from April 1, 2005 to March 31, 2010. It is likely that CMS will model the ACO Pilot after the PGP Demonstration.

Some selected PGP Demonstration Program items to note:

1. Costs of participation - average cost to initiate the demonstration was $489,354, and average cost to operate the demonstration in year one was $1,265,897. The highest costs incurred related to case management. Demonstration program costs may, or may not be comparable to Pilot program costs.
2. Bonus payments - only six out of ten participants received bonus payments.

Currently, CMS has not yet issued the proposed rule for ACO's. Although other sections of the PPACA will become a reality before ACO's, and regardless of the current uncertainties, the importance of planning ahead for the implementation and integration requirements of ACO's cannot be ignored by the prudent provider.

HORNE LLP can assist you with operational assessments of the impacts of Healthcare Reform on your facility. For more information, please contact David Williams, Partner, at david.williams@horne-llp.com.