A Quick Guide to Accountable Care Organizations

Accountable Care Organizations (ACOs) are one of the most talked about components of the Affordable Care Act, and yet the details of their design and implementation remain sketchy.  This is understandable since information about these organizations only makes up seven pages in the massive healthcare law.  In theory, Accountable Care Organizations are a new model for delivering healthcare services, in which doctors and hospitals form a coordinated network of providers and receive financial incentives for providing high-quality care to Medicare beneficiaries while, at the same time, reducing their costs.

More specifically, ACOs would have the following characteristics:

1. Provide patients with accountable care across different institutional settings.
2. Range in size from 5000 to 60,000 of eligible Medicare patients
3. The quality and efficiency of the healthcare delivered will determine the ACO’s success

According to the advocates of ACOs, healthcare providers would have an incentive to become part of an ACO and to invest in it because they would share in the savings that resulted from their cooperation.  Accountable Care Organizations are, in theory, a tool for delivering more cost-efficient and higher quality healthcare.

It will be critical for the ACO to:

• Develop its network of affiliated providers
• Create an integrated mission as an ACO
• Develop operational efficiencies from alignment of people, processes, technologies
• Develop success measures that yield the care quality and cost-saving targets

The ACO model has had a few successes, as even its detractors point out, and the advocates of Accountable Care Organizations may set higher expectations than most ACOs can attain, at least in the early versions.  It appears that the experiences of the healthcare community with HMOs from the ’90s, has created a healthy skepticism regarding how ACO’s ( sometimes referred to as “the HMO model 2.0”) will perform in this “New Normal” era of healthcare reform.

In addition to worries about their costs, many healthcare experts fear that ACOs will accelerate a trend already taking place in the healthcare space: the concentration and consolidation of care. Due to the pressures of healthcare reform and fiscal pressures of the recession, many hospitals and physician groups are considering joining integrated health systems and thus, fewer independent hospitals and physicians.  While this is not, in itself, a danger, it could become one.  Since larger healthcare systems, especially as ACOs, will each have greater market share, they will have increasing leverage over larger populations.  This could be a positive if the system is delivering accountable care at a recognized cost savings, or it could mean we are developing the “too large to fail” concept in healthcare that has rendered our banking and insurance industries more difficult to regulate.

Steve Lieberman, a visiting scholar at the Engelberg Center for Health Care Reform at the Brookings Institution, cautions that we cannot be sure that Accountable Care Organizations are an answer to the problem of rising healthcare costs.  Lieberman says that “ACO has become the three-letter health acronym of the year, if not the decade,” adding that players in the healthcare space tend to implement ideas and institutional models “without working through the detailed business questions of how they’ll work.”

These authors support the concept of Accountable Care Organizations. We feel the ACO model will work for the healthcare consumer, delivering a more effective diagnosis process and efficient delivery of coordinated care, with measurably better results…in quality and cost-effectiveness. Our expectations are that there will be fits of improvement and some disappointments as the system becomes more tuned to realities of delivering cost-effective accountable care over ever-increasing populations…until we come up with the next “good idea” of the next decade.

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