Accountable Care…The Savior of U.S. Healthcare?

Since the passage of the Affordable Care Act (ACA) in March of 2010, much has been discussed, debated, written, and deployed relative to healthcare FINANCING reforms (see insurance, Medicare, Medicaid, self-insured employers, fees/taxes, pre-existing conditions, essential health benefits, community rating, minimum loss ratio, etc.).  But very little has been written, or even revealed for that matter, about the ACA’s healthcare DELIVERY reforms and incentives.  This is too bad, since we know that $.80 to $.85 of every dollar of billed health insurance premium is directly related to healthcare delivery.  So it stands to reason that if we could reduce health CARE costs, health insurance PREMIUMS would follow suit.  Enter Accountable Care Organizations (ACO) into the equation. ACO ‘s aim is to move us further toward achieving the triple aim of healthcare:

  1. Lower Cost
  2. Improve Quality of Care
  3. Increase Patient Satisfaction

Let’s examine what ACO’s are…who they are…and why many are looking to them to save America’s healthcare system from imploding.

Embedded within the 2,000+ pages of the ACA is language seeking to move the U.S. healthcare system away from “fee for service” towards a “fee for value” model.  In short, rather than reimbursing healthcare providers merely for the sheer number/volume of procedures ordered and provided; moving to a model that reimburses based on actual health outcomes, customer satisfaction, and quality. The ultimate goal is to get to a healthcare system that better coordinates and delivers care, in a more efficient and lower cost manner.  In order to achieve these rather ambitious goals, healthcare payers reward ACO’s with bonuses based on meeting/exceeding measurable targets.

In order to make this type of “value based” model work, there are additional data gathering requirements that can be burdensome to some providers.  There is also a component of ACO’s and “paying for performance” which seeks to measure the productivity of healthcare providers, so that ACO bonuses can be properly distributed.  This is done through the use of a metric called – Relative Value Units or RVUs.  RVUs however, are only counted/used for clinical based care.  So the additional non-clinical (see: administrative) work required of ACOs is not assigned RVUs, which could create an incentive for more clinical, and less administrative work, in order to reap the full rewards of this value model.  All of this poses a real conundrum for the healthcare delivery system.

But there is very positive news on the ACO front, as reported by several ACOs around the country.  Here’s some relatively recent data from Blue Cross Blue Shield of Nebraska, which is participating in the ACO model as both a provider and a payer…

  • Preventable hospital admissions reduced by 14%
  • Emergency room costs reduced by 15%
  • Cancer screenings are 13% improved
  • Outpatient services are down 14%
  • Well child visits are 31% better
  • Comprehensive diabetes care improved 9%

Perhaps most interesting of all are the unusual bedfellows being created by ACOs.  Historically health care providers (i.e., doctors, clinics, hospitals, pharmacies, etc.) and health care payers (i.e., insurers, employers, government programs) have not aligned in terms of mission, incentives, etc.  Healthcare providers generate revenue by providing services, and healthcare payers do so by collecting premiums and paying as little as possible for services used by their customers.  ACO’s, by law, must be at least 75% provider controlled….so…you guessed it…payers and providers are aligning.  And in some cases, they are merging into, or creating consolidated entities.  If it sounds like an HMO, it is most definitely not; although there are definite similarities.  The upside to ACOs is the proper alignment of incentives, the resultant improvement in patient care, and (hopefully) reduced health insurance premiums.  Watch for ACOs to be coming to your location soon, if not already!