The Challenges for Accountable Health Organizations (“ACO’s)

In a June report to Congress, the Medicare Payment Advisory Commission (MedPAC) cited ACOs as a possible method of bringing about changes in the Medicare delivery system.  In that report MedPAC examined two variations of ACO’s:

• Mandatory Model:  In this model, providers receive a shared bonus payment for meeting both cost and quality targets and receive a lower Medicare reimbursement if they fail to reach either target.
• Voluntary Model:  In this model, providers receive bonuses for achieving targets and would not be penalized for missing them….as the entire payment method is performance-based.

Both models establish a measurable formula of accountability for providers relative to the health and wellness of a given population of patients that they serve.

Recognizing that the current fee-for-service system drives an increasing level of utilization without regard to overall wellness and without benchmarks upon which to base achievement, MedPAC has suggested that a typical ACO would need to have at least 5,000 “beneficiaries”.

MedPAC isn’t the only one group interested in creating an ACO program.  The American Affordable Health Choices Act of 2009 (H.R. 3200) includes a provision to implement an ACO pilot program to be conducted by the Secretary of Health and Human Services. If the bill is passed, the program will begin no later than January 1, 2012 and would run between 3 and 5 years.

A separate House bill introduced by Representative Peter Welch (D-VT) also calls for the establishment of an ACO pilot program as an amendment to the Social Security Act.

There are some clear challenges to the creation and expansion of ACO’s however and they will not be easily overcome:

1. Population shifts:  The United States is the most mobile societies on the planet.  The U.S. Census Bureau has reported that approximately 16% of the population relocates each year.  This means that every 6.2 years, that the entire population would have a meaningful relocation of their primary residence.  This means that any reimbursement methodology would have to have a method of accounting for and managing this phenomenon so as to appropriately reimburse providers for the right population of patients.  The information systems used by providers are so inconsistent and disconnected that accomplishing this would be virtually impossible.  Of course the government could move forward, but if the providers are not properly compensated, access/quality/costs could all be negatively impacted.
2. Common Incentives:  ACO’s focus, as has been the case in the past, in a strong primary care network that connects with specialists that have a common vision for the population being served.  Additionally, hospitals and outpatient centers (Ambulatory Surgery Centers, Diagnostic Centers, and more) must also be included in the performance measurement program.  There has been no significant demonstration of success in any market in achieving this lofty goal.  The mindset of medical providers as well as the infrastructure that supports them is so focused on fee-for-service methodologies and there exist so many different platform organizations that bringing them together in any way that will yield a positive result is impossible without first identifying for each and all the projected impact on their businesses and bringing them together into a common incentive program.
3. Lacking infrastructure:  There is a serious lack of infrastructure to support an expansive and meaningful ACO strategy.  Information systems on the provider side are fragmented and do not facilitate the type of exchange needed to drive performance up and cost down.  As each year passes, the information management process becomes more complicated and further  fragmented…leaving providers and patients alike to fend for themselves to move data and communicate as a network of providers.  Information systems providers have failed to create a functional system of sharing medical information sufficient to assure that patients get the appropriate care without duplication…in a common manner.

The special interests of all have taken center stage so as to assure that, regardless of the acronym, changing the reimbursement in a manner so as to pay providers based upon performance and to hold them accountable for the outcomes is clearly just a thought and not an initiative.  

If the Fed wants to have a functional ACO program that can be spread widely with positive outcomes; it behooves them to first establish a mechanism that will accomplish the following:

1. Create a simplified and standard method of managing and sharing medical information between and within ACO’s.
2. Create an understandable, measurable payment program that joins the mission of specialists, primary care physicians, hospitals and outpatient centers alike.
3. Broaden the scope of the accountable population base so as to mitigate the impact of transient and disproportionate populations.

Healthcare reform should include some form of ACO program but there is a lot of groundwork to be done ahead of any such initiative…even on a trial basis.

About The Author

Mr. Barber is the founder and CEO of Urgent Care America, which provides management services to urgent care centers across the United States.  Prior to that he served as the Senior Vice President for Health Management Associates, Inc., (NYSE: HMA).  HMA is a leader in hospital management and operates 55 hospitals in 16 states. Mr. Barber has served as a hospital CEO in four different hospitals and has experience in both academic and proprietary ownership structures.  Mr. Barber has been a featured speaker for several organizations and has a vast amount of experience in physician practice management, urgent care management and hospital management.  Mr. Barber is well connected to physicians in many markets around the United States.   Other experience includes, the creation of a Risk Retention Group, development of a corporate-wide medical staff credentials program and the creation of a comprehensive CME and physician relations program designed to better connect hospitals with staff physicians and building physician networks.