Accountable Care Organizations: Good in Theory, Slow to Catch on

The phrase “accountable care organization” (ACO) was coined in 2006. But it didn’t really start gaining currency until three years later when the concept was specifically addressed in the Affordable Care Act (ACA).

ACOs are integrated health care provider systems that link provider reimbursements to established quality and efficiency goals. The theory is that, if the provider offers high-quality and well-coordinated care, patient outcomes will be good, costs will be controlled and the ACO will prosper.

In other words, the incentives of providers, payers and patients (getting good care at an affordable price) are all supposed to align. But the opposite is also true: ACOs that fail to deliver on their quality promises will struggle with costs and patient satisfaction — and, ultimately, fail.

Like many organizations, yours may be exploring a variety of health care delivery models to both comply with the ACA and provide good benefits to your workforce. Although ACOs aren’t without their downsides, they have some potential advantages worth considering.

The ACA connection

The ACA promotes ACOs primarily through its Medicare program. For example, the Medicare Shared Savings Program will allow providers who voluntarily agree to work together to coordinate care for patients — and, if they meet certain quality standards, to “become eligible to share savings with Medicare when they deliver that care,” according to a U.S. Department of Health and Human Services press release.

In addition, the ACA’s Comprehensive Primary Care Initiative seeks to help primary care practices serving Medicare patients “deliver higher quality, more coordinated and patient-centered care” in several parts of the country. Under the program, some primary care physicians’ Medicare income will be supplemented by a monthly fee.

20 million strong

Because of its inherent risks, the ACO model has been slow to catch on. But the movement is beginning to gain momentum. Health care consultancy Leavitt Partners has been monitoring some 626 ACOs. Of these:

  • 210 have commercial contracts,
  • 329 have government contracts (that is, Medicare and Medicaid), and
  • 74 have both.

The firm estimates that 20 million people now receive health benefits via an ACO.

Direct contracting model

Huge companies such as Boeing and Intel have been testing out the ACO model for years. Because of their size, these large businesses are able to establish their own ACOs by contracting directly with health care systems.

For example, Intel launched an ACO for its 5,400 employees near Rio Rancho, New Mexico, last year, partnering with Presbyterian Healthcare Services. Intel projected savings in the $8 million to $10 million range over a five-year period.

That Intel plan, called “Connected Care,” provides 100% coverage for preventive care. Also, medications for hypertension, cholesterol, diabetes and some other conditions are fully covered to incent patient compliance on chronic-condition care. Each patient works with a specific team of specialists to facilitate maximum coordination of care.

A number of pioneering smaller employers also are giving ACOs a try. Typically, they’re doing so as options in private exchanges under a defined-contribution-based health care plan.

Similarities with HMOs

ACOs share DNA with health maintenance organizations (HMOs), the delivery model thought to hold great promise when employers first began experimenting with a variety of managed care models back in the 1990s. With a few notable exceptions, such as Kaiser Permanente and Intermountain Healthcare, HMOs failed to take the market by storm.

One distinction between today’s ACOs and the nonstaff-model HMOs (in other words, organizations that don’t employ providers) is a greater emphasis on provider quality and coordination of care as a means of improving patient outcomes — again, with an intended byproduct being lower costs. But critics are quick to point out that, when cutting costs is the primary purpose of a health care delivery model, the results will likely be disappointing.

Nonetheless, advances in electronic medical records systems and data analytics since the 1990s give ACOs a greater shot at success. And, perhaps most significantly, employee resistance to HMOs generally centered on limited provider choice. ACOs operate with similar “narrow network” constraints but, according to advocates, this can be overcome with effective employee education.

Employee buy-in

Employees can be hesitant to try new health care options such as ACOs — especially if they’ve had negative experiences with HMOs. Employers and their ACOs will need to build trust with employees to enable participants to find a comfort level and confidence in both the plan itself and the provider network supporting it. Granted, one notable challenge to this process may be convincing employees that a narrower network can meet their needs as effectively as a larger one.

To procure employee buy-in for an ACO, an employer and the plan provider will need to emphasize certain aspects of the health care benefits experience. For starters, pre-enrollment communication is paramount. Participants must be well informed on the ins and outs of the model. Once employees have bought into the concept, the orientation process must be methodical and comprehensive. And when the plan is up and running, customer service should be easily accessible, friendly and responsive.

Risks and rewards

As with any health care delivery model, a good theory is only the starting point for assessing an ACO’s potential for your organization. If you choose to become an early adopter, you’ll need to be comfortable with the prospect of a period of trial and error before determining the model’s suitability.

Key variables will include the depth, quality and competitive landscape of the health care market in your community. You’ll also need to weigh your willingness to provide strong plan design incentives to steer employees to the ACO, such as lower coinsurance, copays and deductibles. Work with your financial and benefits advisors to identify the risks and rewards of this model.

© 2014