Accountable Care Organization (ACO)

Businesses Flex Their Muscles To Develop A Model ACO

The effectiveness and profitability of ACOs have been making headlines the past several weeks.

The Centers for Medicare & Medicaid Services (CMS) reported Tuesday that 9 of the 32 Pioneer ACOs are leaving their program. The program was an experiment to try and change the way medical providers are paid for managing their patient’s chronic diseases.

CMS required their experimental ACOs to notify them of any participation changes by July 15th. Furthermore, the ACOs are only eligible to apply for the Medicare Shared Savings Program (MSSP) until July 31st.

“Dropping from the Pioneer program does not mean that providers are abandoning their investments or wavering on the concept of ACOs. Instead, many are moving from Pioneer to the less risky options in the Medicare Shared Savings Program,” says Blair Childs, Senior Vice President of Public Affairs, Premier Healthcare Alliance. Of the 9 that were reported for leaving the program, 7 have confirmed they will be applying to the MSSP.

All CMS-sponsored ACOs should be commended for their improvement in patient care and satisfaction. Of the 32 Pioneer ACOs involved, every single one of them reported respectable quality measures and were rewarded with incentive payments.

However, only 13 Pioneer ACOs saved their system enough money that could be shared among the providers. What may be scaring some of the lesser successful ACOs away from continued participation in the program is the financial risk when there’s a more flexible contract available, the MSSP.

Presbyterian Healthcare Services is one of the less successful ACOs that has announced they will no longer continue as a CMS-sponsored ACO, nor do they intend to transition to a MSSP.

This past January, Intel Corporation, the computer chip company, entered into an unusual agreement with Presbyterian Healthcare Services for a narrow-network accountable-care style arrangement for its employees. Under the ACO guidelines, Presbyterian will lose money through penalties, if they exceed their projections. They have accepted the risks of this patient population and are committed to keeping it as healthy as possible.

Hilary Clinton’s effort to control patients through HMOs was completely rejected because patient control was her main mechanism to controls costs. The culture felt there was no benefit to individuals to be controlled by the government, therefore the effort failed.

A narrow-network in this case means that Intel employees can only go to Presbyterian for their healthcare needs. If they venture outside of this network, they will be required to pay higher bills, either a portion or the whole thing, out of pocket.

This is one of the main differences between HMOs of the past and ACOs of the future. Patients are not limited to their specific network of care.

Intel now describes themselves as being a self-insured company because they no longer use a health insurance company as the middle man to pay their healthcare bills; they are paying for the cost of their employee’s healthcare directly out of their pockets.

Like many other companies have experienced, Intel found that no amount of pressure would cause their previous health insurance companies to bring down costs; therefore, they have gone to this radical new move.

An employer-driven ACO gives payers control over their employees, who have a vested interest in controlling the cost of healthcare because it means their company will do better. They aren’t just being told to control cost; they have a real reason to.

Walmart is another company who participates in an employer-driven ACO. What they have found is that costs for procedures fluctuate tremendously from one provider to the next. Walmart has hand-picked facilities all over the country that provide the highest quality of care for the most affordable prices.

We are beginning to experience transparency in the healthcare industry that has never existed in the past; it is bringing competition between services.

Out of this desire to inspire competition, in hopes of bringing down costs, employer-based ACOs, in a sense, are the perfect ACO situation because the employees, employer and healthcare system mutually benefit from producing quality care, while containing costs. Everyone wins in this situation; therefore, everyone is motivated to do their best at keeping costs as low as possible.

Intel has summed up this whole debacle perfectly; “…Intel couldn’t sell its computer chips if their quality and costs varied as much as healthcare quality varied.”


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