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AAOS Now

Published 10/1/2010
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Alexandra E. Page, MD

ACOs: The future of healthcare delivery?

AAOS Health Care Systems Committee studies Accountable Care Organizations

The passage of the Patient Protection and Affordable Care Act of 2010 (PPACA) anticipates fundamental changes to the models of financing and delivering health care in the United States. Changes will start with Medicare, but are predicted to expand to the private sector.

In recent years, the Centers for Medicare and Medicaid Services (CMS) and other private entities have introduced a variety of pilot systems for integrating healthcare services. Among these various models, the Accountable Care Organization (ACO) is emerging as dominant.

In July, the AAOS Health Care System Committee (HCSC), chaired by Kevin J. Bozic, MD, MBA, organized a symposium on ACOs. The symposium featured the following speakers:

  • Robert A. Berenson, MD, senior fellow at the Urban Institute and vice chair of the Medicare Payment Advisory Commission, on the impact of ACOs and vertical integration on overall delivery of health care
  • Mark B. McClellan, MD, PhD, director of the Engelberg Center for Health Care Reform at the Brookings Institute and former CMS administrator, on the role of the specialist in the ACO model
  • AAOS fellows David S. Jevsevar, MD, MBA, and Thomas C. Barber, MD, on their experiences and the delivery of orthopaedic care by the Intermountain Health System and Kaiser Permanente, respectively
  • James T. Caillouette, MD, and Richard F. Afable, MD, MPH, on an alternative model for the integration of a nonintegrated system
  • Anthony H. Schiff, JD, MPH, on the legal considerations of an ACO
  • Richard E. White, Jr., MD, on preliminary results of the CMS Acute Care Episode demonstration project
  • ACOs: A high-level view

The emergence of the accountable care model has its roots in the current crisis of rising healthcare costs. Fee-for-service payments have been targeted as a major factor contributing to rising costs.

Recently, attempts have been made to minimize costs associated with what are perceived as preventable poor outcomes. Linking compensation to demonstrable quality outcomes or to reductions in complications (such as pay-for-performance programs and Surgical Complication Improvement Project measures) is a first step, but these programs still do not shift liability for the cost of complications to hospitals and providers. Hence, if quality of care improves (fewer complications), Medicare and other healthcare providers could benefit financially.

The actual language of the PPACA calls for a shared savings program; the ACO is the sanctioned format of such a program.

The primary goal of the ACO is to align all healthcare providers in providing care in the most effective and cost-efficient manner. From a financial standpoint, the model forces hospitals, physicians, and other care providers to work together to contain costs. As such integrated payment models mature, focusing on improving quality and patient outcomes will be increasingly important both internally (to control costs) and externally (to modify reimbursements).

ACOs and the PPACA
The PPACA states that “... an ACO shall ... be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it.” The PPACA requires an ACO model to have the following fundamental components:

  • The ability to provide care across a continuum of settings, including ambulatory and inpatient settings at a minimum
  • The capability for planning budgets and resources
  • Sufficient size to monitor and report on quality measurements

To satisfy the first component, a formal legal structure and a 3-year agreement is required. The model provides the “medical home” with a primary care provider (PCP).

An ACO must provide access to all specialties, but those specialists do not need to belong to the ACO. Integrating specialists into an ACO, however, should result in better value and greater shared savings. Lack of coordination between PCPs and specialists can result in duplication of efforts (laboratory tests, imaging studies) and poor support for preventing complications, decreasing the shared savings. Thus a successful ACO should promote PCP-specialist coordination.

The second component is easily understood. Many of the savings forecasted by CMS and lawmakers rely on improving efficiency through improved technology. The costs of implementing technologies such as electronic medical record systems and telemedicine are high; an ACO must have the financial resources to invest.

Additionally, the structure of an ACO supports effective use of existing capital resources. Rather than adding hospital beds to increase volume, incentives could be used to reduce admissions through preventive care and to shorten length of stay.

Finally, ACOs must be sufficiently large enough to be able to monitor and report on quality measures. MedPAC estimates “sufficient size” as 5,000 patients; defining and measuring quality is more elusive. In healthcare reform terms, “quality” not only encompasses quality as an orthopaedic surgeon might define it (outcome of a surgery), but also system efficiency and effectiveness.

The PPACA outlines the goals of an ACO as “... define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of tele-health, remote patient monitoring, and other such enabling technologies ...” During the AAOS HCSC symposium, several experts identified patient-centered care, quality outcomes, and value as the new benchmarks for health care.

The law requires that the Secretary of Health and Human Services establish a shared savings program by January 1, 2012, for items and services under Medicare Parts A and B. The law has been signed, yet the regulations for enactment have not yet been written. Consequently, much of what is projected now may change over the next few months.

Alexandra E. Page, MD, is an AAOS Leadership Fellow and member of the Health Care Systems Committee. She can be reached at alexe.page@gmail.com

Editor’s note: This article is the first in a series reviewing the presentations and summarizing the discussions of the recent HCSC symposium ACOs.