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Electronic health records // Coordinators to track patient medical histories // Hospitals sharing savings and losses // All with the goal of curbing costs and improving health.

ACOs: Time to Regroup

By Linda Keslar // Illustrations by Jude Buffum // Summer 2011
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Jude Buffum

Like so many other primary care physicians, Jon Wilding feels overwhelmed by the growing number of very sick, elderly patients coming to his office. Today almost half of the 3,000 people he and his partner treat in their small practice in suburban Louisville are covered by Medicare. Not surprisingly, Medicare beneficiaries tend to have nearly intractable medical conditions, with more than half suffering from multiple chronic illnesses— diabetes, arthritis and kidney disease, among others.

Largely left to their own devices in finding help with these problems, these patients have a habit of seeing several physicians, including specialists. No referrals are needed, and Medicare pays a fee to each doctor for every visit. That adds up to a situation in which not only are there no limits on how much is spent, but often there’s no one in charge to make sure patients don’t receive unnecessary or counterproductive treatments.

For Wilding and others who take on the responsibility of managing their patients’ care, it can be time-consuming and complicated. With his staff, he tries to keep tabs on patients with follow-up calls after office visits or hospital stays. They also go over patients’ prescriptions with them and make sure patients are sticking with treatment regimens. But neither Medicare nor the region’s private insurers reimburse the practice for coordinating a patient’s care, Wilding says.

The pressures of caring for an aging population will only increase as those in the mammoth baby boom generation, an estimated 77 million people born between 1946 and 1964, turn 65. This year, the first 3 million will reach that milestone, adding significantly to the 47.5 million patients covered by Medicare in 2010. The latest edition of the Medicare trustees report, an annual statement of the program’s fiscal health, dubbed this unprecedented demographic wave the Baby Boom Tsunami, noting that it will virtually double Medicare enrollment during the next two decades. That explosive growth will jeopardize the federal program’s ability to meet its obligations at the same time that it inundates physician practices and hospitals.

The solution, as laid out in the controversial 2010 Patient Protection and Affordable Care Act, is to create something entirely new: accountable care organizations. The U.S. law allows physician group practices, hospitals and other providers to team up as ACOs. Aided by the electronic health record systems the ACOs must adopt, primary care physicians or non-physician “care coordinators” will track each doctor visit and prescription for every patient, and will know when someone receives physical therapy, shows up at the ER or is admitted to the hospital. Patients will no longer have to repeat their medical history each time they see a new specialist, and with one person taking ultimate responsibility for each patient’s care, the chances of prescribing errors, conflicting treatment plans, and unnecessary or repetitive testing should plummet.

At least that’s how the inventors of ACOs hope they will work. Though the new system won’t eliminate the “do more and you’ll get paid more” incentives of fee-for-service Medicare, it will attempt to encourage a cooperative, comprehensive and economical way to provide treatment—and will put some of everyone’s compensation at risk if that doesn’t happen.

Still, the ACO era is off to a slow start. Most hospital and physician leaders have been disappointed with the government’s first attempt to write rules for how Medicare ACOs must operate, and though a few ACO-like organizations tied to private insurance companies have shown promise, no one knows whether such combinations will prove financially viable. It’s possible that this latest, ambitious attempt to reinvent health care—in pursuit of those eternal twin goals of improving care and curbing costs—could end up being no more successful than past initiatives. The health maintenance organization, dreamed up in the 1970s, had objectives similar to those of ACOs, yet HMOs have largely failed to deliver economical, comprehensive health services.

A final version of Medicare regulations for ACOs, coming after extensive public comments, isn’t expected until later this fall. And until the rule book has been published, many health systems are reluctant to commit to the new structure. Yet that doesn’t mean hospitals and physicians aren’t furiously preparing for it. There has been a wave of consolidation intended to position organizations to form or join ACOs, and it’s almost guaranteed that many groups will at least test the waters. “It’s clear to us that we need to move toward being an ACO,” says Thomas Lee, network president of Partners HealthCare, the system co-founded by Massachusetts General Hospital and Brigham and Women’s Hospital in Boston. “How to change our organization so we can do what’s involved, such as developing a capacity to coordinate care—that work is already under way.”

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1. The Center for Population Health at The Dartmouth Institute. A valuable primer, including a description of current legislation and a detailed presentation of the ACO initiatives launched by Dartmouth and the Brookings Institution.

2. “Launching Accountable Care Organizations—The Proposed Rule for the Medicare Shared Savings Program,” by Donald M. Berwick, The New England Journal of Medicine, March 31, 2011. The administrator of the Centers for Medicare & Medicaid Services provides a thorough discussion of the proposed regulations.

3. “Shared Savings Program for Accountable Care Organizations: A Bridge to Nowhere?” by Robert A. Berenson, The American Journal of Managed Care, Oct. 1, 2010. Berenson, a physician and health care expert at the Urban Institute, reviews drawbacks to the payment approach proposed in current legislation and suggests alterations.

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