Why Accountable Care?
The Accountable Care Organization (ACO) model offers a promising approach for achieving higher quality and lower cost health care without requiring radical change in the current payment system or referral patterns. Fee-for-service can remain in place, and most physicians already practice within referral networks around one or a few hospitals. By promoting more strategic integration and care coordination, the ACO model offers a potential win-win for providers, payers, and patients alike.
The ACO approach also builds on current reform efforts that focus on one key group of providers, as in the medical-home model, or on a discrete episode of care, as in bundled payments. On their own, these initiatives may help strengthen primary care and improve care coordination, but they do not address the problem of supply-driven cost growth. If adopted within a framework of overall accountability for cost and quality, as the ACO model envisions, both the medical home and bundled payment reforms would have added incentives to support higher-value care delivery.
The ACO approach is currently being implemented nationally in the private and public sectors, such as the Brookings-Dartmouth ACO Pilot Sites, the Blue Cross Blue Shield of Massachusetts Alternative Quality Contract (AQC), the Medicare Shared Savings Program, and the Medicare Pioneer ACO Model.
What is an ACO?
The ACO model brings together coordinated networks of providers with shared responsibility to provide the highest value care to their patients. It does so by establishing a spending benchmark based on expected spending. If an ACO can improve quality while slowing spending growth, it receives shared savings from participating payers.
Because providers receive a share of the savings beyond a predetermined threshold level, steps that achieve better outcomes with less resource use—such as care coordination services and wellness programs—result in greater provider reimbursement. These steps pay off and are sustainable in a way that current reimbursement systems are not. The shared savings approach provides an incentive for ACOs to avoid expansions of health care capacity that drive both regional differences in spending and variations in spending growth and that do not improve health.
The ACO model has three key principles:
1. Local Accountability. ACO entities will be comprised of local delivery collaborations that can effectively manage the full continuum of patients’ care, from preventive services to hospital-based and nursing-home care. Their patient populations are comprised of those who receive most of their primary care from the primary-care physicians associated with the ACO.
ACOs can be Configured in Different Ways
2. Shared Savings. ACO-specific expenditure benchmarks will be based on historical trends and adjusted for patient mix. Contingent on meeting designated quality thresholds, ACOs with expenditures below their particular benchmark will be eligible for shared savings payments, which can be distributed among the providers within the ACO. These shared savings allow for investments—in health IT or medical homes, for example—that can in turn improve care and slow cost growth.
Shared Savings Derived from Spending below Benchmarks that are Based on Historical Spending Patterns
3. Performance Measurement. Valid measurement of the quality of care provided through ACOs will be essential to both ensuring that cost savings are not the result of limiting necessary care and promoting higher-quality care. Such measurement should include meaningful outcome and patient-experience data.