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Ready or not...

February 1, 2011
by Kathleen Griffin, PhD, Pam Selker Rak, and Shannon Webber
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ACOs are on their way

There is no denying that healthcare reform continues to be at the forefront of everyone's mind these days. With the recent changes in the House of Representatives, many people are wondering if healthcare reform will be repealed. Congress will likely work to cut the budget for the newly formed Centers for Medicare & Medicaid Services (CMS) Innovations Center, and this will slow down innovations that drive down healthcare costs. It will also turn the focus to revoking mandatory healthcare coverage for all Americans, because that adversely impacts large insurance companies and taxes.

While repeal remains to be seen (though the general consensus is no), the Accountable Care health model will go forward, and perhaps even faster than you think. The reason? It's being driven largely by the private sector (insurance companies and large hospital systems), not CMS.

The driving factors are clear. Accountable Care Organizations (ACOs) were created as a cost-control measure for Medicare, driven largely in part by private insurance companies, not by the government.

ACO Demonstrations In Full Swing (Source: The Camden Group)

Medicare Pilot Sites

Carilion Clinic (Roanoke, VA)

Norton Healthcare (Louisville, KY)

Tucson Medical Center (Tucson, AZ)

Private Payer Pilot Sites

Anthem Blue Cross/Blue Shield (Multistate)

Monarch Healthcare (Orange County, CA)

Advocate Health Care (Blue Cross/Blue Shield of Illinois)

Healthcare Partners (Torrance, CA)

Kathleen Griffin, PhD
Kathleen Griffin, PhD

And it's tough to argue with the goals of the Accountable Care model because when physicians, hospitals, and other provider types in the continuum of care all work together to prevent readmissions and other unnecessary costs, while also providing more accountable care for patients, healthcare is less expensive and safer.

Pam Selker Rak
Pam Selker Rak

The contingents that will perhaps feel the biggest impact of ACOs are the post-acute and long-term care providers that are referred to as continuing care providers (CCPs). This group has undergone some recent changes in that many providers have added home health and hospice to their continuum of care. With the advent of ACOs, the industry is evolving into a complete range of care for patients, and CCPs are an important part of the new structure. It is important that providers understand that they are auditioning to work with ACOs and be fully prepared to show they're providing the highest care at the lowest cost.

Shannon Webber
Shannon Webber

ACOs need the ability to provide services in the lowest cost venue and they must have enough primary care physicians to provide necessary services. CCPs should begin preparing to partner with ACOs prior to the upcoming implementation. This means understanding the basics about ACOs and showing value to form strong and lasting partnerships.


There are a number of ACO pilot programs in operation and the formal program will begin implementation in January 2012. The final set of rules around forming an ACO will be made available by October 2011.

In terms of formation, it is important to keep in mind that ACOs must have primary care physicians and enroll at least 5,000 Medicare beneficiaries. There are a number of organizations (e.g., Brookings-Dartmouth, Premier, and AMGA) that are assisting hospitals in aligning with physicians to get them prepared for the processes and procedures that are part of ACOs. For example, if a beneficiary's physician is in the ACO, the beneficiary will automatically be part of the ACO as well. Having 5,000+ beneficiaries is important in order to mitigate the potential risks of high-cost patients among the ACO's fee-for-service Medicare beneficiaries.

Most ACOs under development today are hospital-driven. ACOs require an enormous IT platform for operation and EHR and EMR congruity will be required. Some hospitals own post-acute care continuums or they create a continuing care network to meet certain quality and outcome criteria. An effective post-acute continuum allows for easy and quick transfers from hospitals and reduced or eliminated readmissions. Emergency department admissions are also lowered and this results in reduction of cost since ED visits are so expensive. Finally, patients with higher medical acuity are managed more effectively. Hospitals looking to be an ACO either can own a continuum, create a continuum of selected providers, or form a joint venture with a Medicare skilled facility.


The question on everyone's mind is undoubtedly, “How will we be paid?” There is not just one answer to this question as there are several ways that payments will occur in an ACO. The following provides a brief overview of each option.