Accountable Care Organizations (ACO) will change the way medical services are paid for by Medicare, and they could possibly deliver savings of 40% from the existing fee-for-service Medicare payment system. One blog I read called ACOs ‘unicorns’ because “every one knows what they look like but no one has seen one”.
Wikipedia information on accountable care organizations (ACO) includes the following:
..a type of payment and delivery reform model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. A group of coordinated health care providers form an ACO, which then provides care to a group of patients…
While the ACO model is designed to be flexible, Dr. Mark McClellan, Dr. Elliott Fisher and others defined three core principles for all ACOs: 1) Provider-led organizations with a strong base of primary care that are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients; 2) Payments linked to quality improvements that also reduce overall costs; and, 3) Reliable and progressively more sophisticated performance measurement, to support improvement and provide confidence that savings are achieved through improvements in care.
According to an article in Business Week:
Aetna (AET) estimates that ACOs could deliver savings of 40 percent compared with the existing fee-for-service system. The Hartford-based health insurer has spent $2 billion to become a leading player in the field. “Accountable care is one of those models we see as the future of the company,” says Dr. Charles Saunders, Aetna’s head of strategic diversification. UnitedHealth Group (UNH) has also been snapping up technology and care management companies, inking six deals in the last 18 months. Essence Group Holdings, a Maryland Heights (Mo.) company that administers a private version of a Medicare plan, estimates that setting up ACOs will be an $80 billion business. Essence, which works with Rice’s practice and others, plans to double or triple its 400-person staff over the next year to keep up with demand, says spokesman Andrew Shea.
The current Medicare payment system, where every service, test, or even a consultation, generates a separate bill, is the root problem for Medicare. Years ago, people would get two tests to check on a heart problem. Now there are dozens of tests, and some of them are very expensive. More and more tests (some of them unnecessary) cause Medicare’s expenditures per Medicare beneficiary to climb each year. If a new way of doing business could slash Medicare’s expenses by 40%, this could put the program on a more sustainable path.
The Affordable Care Act calls for ACOs to lead the way in changing the way Medicare pays for care. Of course, there is political posturing over ACOs (Democrats are for and Republicans are against), and getting into this business could be a big risk for insurance companies, hospitals, and doctor groups. What if the Affordable Care Act is repealed? Then what happens to all the work that has gone into ACOs? Politicians should just agree that this fix to Medicare is necessary, and get on board. Medicare needs to get its financial house in order sooner rather than later, but there always seems to be one objection after another that maintains the status quo. It’s time for a change in the way Medicare pays seniors’ health care bills. It looks like Accountable Care Organizations could be the answer.