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What is an ACO?

What is an ACO?

This question seems to be getting a lot of buzz lately. What does it mean? Where did it come from? Why are we even talking about it?

To answer this question let’s start with a little background.

The very first Congress of the United States of America met March 4, 1789. It focused on setting up departments (War, State, Treasury, Judiciary, etc.) and attending to the inauguration of the first President of the US…things like that. First-time stuff, formative stuff, stuff that is still in existence. And nine years later, in 1798, they again did something for the first time….Congress enacted a health care law. This law set up a network of federal hospitals across the country to care for the needs of merchant seamen who were sick or disabled. Why is this important to know? Because it is part of the reality that in our country the US government has been involved in health care when it is in our national interest, and they have done so since our formation. More laws followed and over the next two centuries Congress enacted many health related laws: the Office of the Surgeon General, national laboratories to examine disease, restrictions on smoking, the formation of Medicare and Medicaid, followed by the extension of Medicare benefits to cover prescription drugs, and now to the passage of the Accountable Care Act, sometimes called Obamacare.

The Accountable Care Act is a major piece of legislation that covers the proverbial ‘waterfront’ of all things dealing with health. Why do we have this new law? In short,--it is primarily to help reduce the growth rate of health care spending. When I entered graduate school the percentage of the GDP for health was just a little over 5%. Now it is pushing 18%; and the Congessional Budget Office projected it would be 46% of the GDP by 2080. Half of this total cost is paid for by government. In looking at other countries for comparison researchers found that the US spent about twice as much per person as the next nearest country spent and we actually had poorer health statistics to show for it.

As a result of this growing cost, as well as other issues related to performance, Congress passed the Affordable Care Act (ACA) with all its many parts and pieces. The ACA is designed to address primarily three things: cost, quality and access. The law has many components to achieve this “triple aim” and structural modification (that is, developing new models of care delivery) is one of them. Some structural components mentioned in the law are: value-based purchasing, transitional care, primary care medical homes, bundled payments, and accountable care organizations. There were few mentions of this potential new structure called an Accountable Care Organization (ACO). So, what is this?

Simply put, an ACO is a group of health care providers, such as: physicians, nurse practitioners, hospitals, home health agencies, nursing homes, rehab facilities, payers, etc.. These providers voluntarily agree to collaborate and coordinate the care for a defined group of patients with the goal of improving this defined populations' health, reducing cost of care and improving the care experience for its patient population. If preset, measurable goals are achieved, then the ACO may be able to receive a financial reward. If a Medicare ACO this is sometimes called, ‘shared savings’ because the reward must come from the money saved. [Gamble and Punke, Fifty Things to Know About Accountable Care Organizations] It is projected that ACOs will save the Medicare program over $900 Million in the first few years. An ACO can participate in Medicare as well as private employer or insurance company health plans.

By the end of 2013 there were approximately 500 ACO’s throughout the country covering more than 43 million people. As I write this, ACOs continue to proliferate and grow in number, as well as specialty focus. About half of these are Medicare ACO’s. What does it mean for someone who is now, or soon will be, a Medicare beneficiary? If covered by Medicare, a patient does not ‘join’ an ACO. The doctor, or other care-giver, or hospital or other facility joins an ACO, not the beneficiary. Care givers who join an ACO must notify their patients from the recent past of their participation in an ACO. Medicare beneficiaries may decline to have any of their protected information shared within the ACO; additionally they can opt out entirely and choose to receive their care from another provider if they do not wish to engage with the ACO.

ACO’s are part of a new concept that is reshaping health care—that of population health management. The intent is to improve health for everyone. This is a tall order and ACOs will not be able to do it on their own. Many issues need to be addressed to achieve these aims. ACO’s, which organize and reward care-givers to work together coordinating care, improve health outcomes and enhance access to services at a lower overall cost, can help to improve our health system. This won’t come easily, nor soon…but it must come if the US is to reduce the rate of growth of health expenditures .