Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Value-Based Care News

Top 6 Accountable Care Organization Questions Explained

By Jacqueline DiChiara

- Sometimes questions are more important than answers.

accountable care organizations population health

Accountable care organizations (ACOs) — groups of doctors, hospitals, and healthcare providers helping provide Medicare beneficiaries with top-notch coordinated fee-for-service care – are creating a flurry of questions across the healthcare industry.

Here are 6 top inquiries regarding the pros and cons of the still relatively new ACO, as answered by leading healthcare experts.

Is anyone making any money?

“Nobody is making any money,” explained Timothy “Dutch” Dwight, Medullan’s Vice President of Business Development.

READ MORE: Physician Compensation for Specialists 45.6% More than for PCPs

“I would call the ACO an administrative burden on both the health plan as well as the hospital or provider network. It's hard to set up. There are no data standards, so it's very difficult to capture the data you need.”

The $50 million cost of an EHR infrastructure is merely too expensive for hospitals and health systems to afford, he stated.

“[Hospitals and health systems are] looking at revenue versus loss, and spending money on an EHR or data analytics doesn’t directly contribute to revenue right now, because the incentives aren’t aligned yet. What organization in your life has ever said, ‘Let's decrease our revenue – that's a good thing to do'?”

Nonetheless, ACO implementation may be saving beneficiaries a lot of dough. Those ACOs participating in the CMS Pioneer ACO Model saved over $384 million within their first two years of implementation, according to a study from the Journal of the American Medical Association. This amounted to around $300 in annual savings per beneficiary.

But such large numbers may not last long, said Lawrence P. Casalino, MD, PhD, Professor of Healthcare Policy and Research at Weill Cornell Medical College.

READ MORE: CMS Calls on Stakeholders for Pediatric APM Development Input

“It is possible that during the first year these ACOs were able to 'grasp the low-hanging fruit' - to address relatively easy ways to control costs - and that the savings they generate will be much smaller, at best, in subsequent years.”

“Alternatively, it may be that it will take time for ACOs to develop better processes to improve the care of their patients and that they will be able continue to lower costs for years to come.”

Is capitation the ACO answer?

The capitated model is incredibly efficient when it comes to ACO success, said Richard Slavin, MD, CEO of the Palo Alto Medical Foundation, to

With the capitated model, “there’s a finite amount allocated to the healthcare delivery system, which has to evolve to provide superb care with a predetermined fixed dollar amount per patient. ACOs are transitions from a pure fee-for-service model to a population management model,” explained Slavin.

READ MORE: CMS Reopens Next Generation ACO Application Request Portal

Over the past 15 years, there has not been any significant reimbursement increase for those physicians caring for Medicare patients, Slavin confirmed. Inflation over this time period was around 30 percent, he said.

“This deficiency in Medicare reimbursement to physicians has resulted in cost shifting to the commercial market to subsidize the under-funding from the federal government for care for Medicare patients.”

Those involved in a capitated system “know the full scope of money involved and there is a lesser concern about seeking to perform more services to earn more money,” said Matthew R. Fisher, Co-Chair of Mirick O’Connell’s Health Law Group, to

“You’ve got everyone trying to figure out how to work with a defined pot of money. By its nature, that type of shift in the system will help drive alignment and help drive strategies to get people working together.”

A danger of capitation is that it involves a one-time savings, stated Bruce Hallowell, Navigant’s Managing Director, to

“ACOs are really capitation at the service level … I don’t think it’s the answer to the cost of healthcare. It’s kind of like we took something and we repackaged it thinking that it would resolve something when it didn’t actually work the first time.”

“[We] need to look at it from a holistic standpoint, looking at the drivers of cost and just because someone’s at risk doesn’t mean the cost goes down.”

Are ACOs worth the alleged headache?

Usually, the harder you work, the more progress you make overall. This simple mantra may not be the case when it comes to ACO success.

“The argument from the ACO community is that if you start off doing a really good job, or you keep doing an extraordinarily good job year after year, you’re effectively being punished for that by the way the benchmarks are set up right now,” stated April Wortham Collins, Senior Analyst at Decision Resources Group.

“If your ACO successfully implements some basic population health management techniques, chances are you’ll be able to generate some savings, and maybe even share in them,” she asserted.

“However, for each year of the ACO agreement, that benchmark gets adjusted. The bar gets raised, and it becomes harder to meet the threshold because you’ve already taken care of a lot of the low-hanging fruit.”

What exactly makes an ACO successful anyway?

"Successful financial, clinical, population health and risk management of an ACO is dependent upon a strong [health IT] infrastructure and an ability to exchange health data across disparate systems and settings," wrote the Workgroup for Electronic Data Interchange (WEDI) ACO Taskforce in a Setember ACO report.

"The more complex and interconnected that an ACO network becomes … the more dependent the entity becomes on health IT to efficiently access accurate, granular information to inform decisions, coordinate care transitions, [and] monitor patient health and target services at an individual and/or population level."

According to the Centers for Medicare & Medicaid Services (CMS), a successful ACO yields shared savings for both healthcare providers and payers.

Healthcare providers’ overarching goals are to “ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors,” stated CMS.

Has growth been consistent?

“In 2014 alone, existing Shared Savings Program ACOs added almost 17,000 healthcare providers, and the 89 new ACOs will bring approximately 23,000 additional physicians and other providers into the ACO program starting January 1,” confirmed CMS. “The growth of this program for providing health care has been continued and consistent since its inception.”

“ACOs have reached an important point in their evolution,” stated Niyum Ghandi, Partner at Oliver Wyman, to “There are enough of them that they will be able to capture market share very quickly once they start demonstrating superior value.”

“As the number of ACOs continues to increase, we’re seeing more small organizations begin to enter the various programs. Some of the earlier entrants into the Pioneer ACO program and MSSP were very large – with a few having over 100,000 Medicare beneficiaries.”

“As more successful organizations emerge and identify the keys to success within their models while refining and scaling their transformation, we’ll start to see those who have been slower to move or have been struggling learn from the successes of the leaders.”

Are ACOs going to fade away in coming years?

Sixty percent of health plans say they will make the switch to pay-for-outcome medicine within the next few years. But is jumping on the ACO bandwagon the ticket to value-based care success? Maybe.

“We see development of and participation in ACOs as an important part of our future as we move from a fee-for-service based payment system to population-based models based on quality, safety and the patient experience,” said Lee Huskins, President and Chief Administrative Officer at John Muir Health’s Physician Network, to

The ACA is moving the health care system in the United States away from a fee-for-service model to an emphasis on population health. As a health system, we are increasingly [held] accountable for providing the right care at the right time and in the most appropriate setting with an emphasis on quality, the patient experience[,] and cost.”

“Medicare has said ACO bundled payments and patients in medical homes are the platform of their future,” asserted Paul Keckley, Managing Director of the Navigant Center for Healthcare Research and Policy Analysis, to

“When the biggest single payer in the US health system is saying 50 percent of what it pays out will be through these models over the next two years, I don't expect they're going to back away from that.”


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