Accountable Care Organizations: Solution or Same Old Thing?
Nearly two-thirds (65 percent) of employers surveyed by Aon Hewitt and Polako Boland in 2011 said they would be interested in using accountable care organizations (ACOs) to provide healthcare benefits to employees. Can ACOs work in the employee benefit system to deliver promised improvements in quality, communication and cost control?
What are ACOs?
Despite having higher per capita healthcare costs than any other developed nation, the U.S. falls behind on many measures of health and healthcare safety. In addition to having a relatively high rate of infant mortality, the U.S. loses 2,500 people and spends an additional $19.5 billion per year due to “preventable adverse events” (medical errors) in hospitalized patients. The Agency for Healthcare Research and Quality, a federal agency, says, “…the true number and impact of errors may be higher…” The Institute of Medicine noted that “…many of the errors in health care result from a culture and system that is fragmented, and improving health care needs to be a team sport.”
The Medicare Shared Savings program created by the Affordable Care Act includes a number of policies, including ACOs, designed to encourage cooperation and communication among healthcare providers to improve quality of care and reduce costs for Medicare patients. The law permits ACOs to begin contracting with Medicare in January 2012. These accountable care organizations will offer financial incentives for healthcare providers to work together to treat an individual patient across care settings—including doctor’s offices, hospitals and long-term care facilities. The Medicare Shared Savings Program will reward ACOs that lower growth in healthcare costs while meeting performance standards on quality of care and putting patients first.
Patient and provider participation in an ACO will be voluntary. Medicare beneficiaries whose doctors participate in an ACO can still see doctors outside of the ACO. Patients choosing to receive care from ACO providers will have access to information about how well their doctors, hospitals or other caregivers meet quality standards.
Will ACOs Work for Employer Groups?
Health maintenance organizations (HMOs) were supposed to solve the problem of rising healthcare costs more than 20 years ago. HMOs provide comprehensive healthcare services to members in exchange for a specified monthly premium. If a member needs expensive or costly care, the HMO bears the financial risk, not the member or insurer. To control costs, HMOs limit coverage to care from doctors who work for or contract with the HMO. Many provide integrated care and focus on prevention and wellness.
However, some employee groups didn’t like HMOs. They didn’t like having to give up their existing healthcare providers, and they didn’t like the perceived limits on the care they received. As a result, employers pressured insurers to loosen HMO network restrictions. Without control over healthcare providers, HMOs couldn’t control costs as well, and today HMO premiums, on average, cost more than premiums for a PPO (preferred provider organization) plan.
Although ACOs can take many forms, many experts agree that to successfully control costs and ensure quality, ACOs must focus on primary care. The National Council on Healthcare Quality (NCHQ) also says, “…ACOs must include a group of physicians with a strong primary care base and sufficient other specialties that support the care needs of a defined population of patients….ACOs will also need the administrative infrastructure to manage budgets, collect data, report performance, make payments related to performance, and organize providers around shared goals.” In other words, ACOs must be large enough to provide most (if not all) of the services a patient might require, along with the necessary support structure.
HMOs All Over Again?
ACOs differ from the HMO model in three ways:
Accountability belongs to healthcare providers, not insurers. To avoid financial failure, ACOs must spread the risk among a fairly large group of healthcare providers.
Several types of provider organizations can participate in ACOs, including independent practice associations (IPAs) and physician-hospital organizations (PHOs).
ACOs could contract directly with provider organizations, rather than using a health insurer as an intermediary.
ACOs will have serious challenges to overcome. Our medical care system has created an imbalance of providers, with many specialists and a shortage of primary care physicians; ACOs will have to make primary care financially attractive for providers. Most insurance plans reward hospitals and physicians for the number of services they provide, regardless of quality or need, often leading to unnecessary and sometimes detrimental treatments. ACOs must find alternative ways to incentivize hospitals and physicians to provide only the care needed. Finally, solo practitioners and small physician groups, many of whom provide needed community-based primary care services, often lack the financial and organizational resources needed to form ACOs.
We will keep you informed of these and more developments in the group health insurance industry. For more information on controlling your employee health costs in the interim, please contact us.
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