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Accountable Care Organizations - Health Cost Containment
Updated February 2013
The following NCSL Issue brief has been distributed to legislators and legislative staff across the country.
Accountable Care Organizations - PDF File
Colorado Supplement: Accountable Care Organizations - PDF File
To read portable document format (.pdf) files, use Adobe Acrobat Reader.
Cost Containment Strategy and Logic
An accountable care organization (ACO) is a local, provider-led entity comprised of a wide range of collaborating providers. ACOs monitor care across multiple or all care settings (e.g., physician practices, clinics and hospitals) and are accountable to health care payers (e.g., Medicaid, Medicare or private insurers) for the overall cost and quality of care for a defined population. They provide an overarching structure for coupling health care delivery system reforms (e.g., medical homes and electronic medical records) and new forms of provider payment (e.g., global and episode-of-care payments) (Figure 1). The ACO concept envisions direct contracting by payers with provider organizations without reliance on a health plan intermediary such as a managed care plan.In and of themselves, ACOs are not a cost containment strategy. Rather, they are a vehicle for implementing comprehensive payment reform and health care system redesign in order to control the growth in health care costs and obtain better value for each health care dollar.
Summary of Health Cost Containment and Efficiency Strategies— Brief #5- Accountable Care Organizations (ACOs)
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State/Private Sector Examples |
Strategy Description |
Target of Cost Containment |
Evidence of Effect on Costs |
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Vermont, Colorado, Brookings/Dartmouth local pilot programs |
A local entity comprised of a wide range of collaborating providers that is accountable to health care payers for the overall cost and quality of care for a defined population. |
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Lack of a locus of accountability for overall health care costs and quality for a population of patients.
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Fragmentation of care.
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Because it is a relatively new concept that has not been fully tested, there is insufficient evidence to assess the effect on costs. Existing evidence is mixed.
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Meetings
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Health Costs: New Payment Reform Approaches- Fall Forum Session, Phoenix, AZ, 12/10/10. Both publicly funded programs and private insurance markets are talking a lot about Accountable Care Organizations and "all payer databases" as tools to contain health costs and improve quality. Receive an update on these strategies, with examples from states and NCSL resources.
Presenters
New Reports and Resources
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"106 new Accountable Care Organizations (ACOs) in Medicare, ensuring as many as 4 million Medicare beneficiaries now have access to high-quality, coordinated care across the United States," according to HHS Secretary, Kathleen Sebelius. "Expenditures per Medicare beneficiary increased by only 0.4% in fiscal year 2012, substantially below the 3.4% increase in per capita GDP," according to the Office of the Assistant Sectretary for Planning and Evaluation's report, Growth In Medicare Spending Per Beneficiary Continues To Hit Historic Lows, January 7, 2013.
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Delivery System Reform In The November 2012 Health Affairs Issue - It's too soon to fully gauge the effectiveness of accountable care organizations (ACOs) or patient-centered medical homes, but no one can say that they aren't off and running. Nine articles in the November issue of Health Affairs offer early insights on ACO and patient-centered medical home care delivery models, both of which have made significant headway in a relatively short period of time. ACOs, in particular, have seen considerable momentum--from a standing start just two years ago to more than 300 ACOs now operating in forty-eight states. The goal of both models is to more tightly coordinate care and improve the health of patients, but no one is sure whether either model will deliver major cost savings, especially right away. Articles include the following: [Note to NCSL members only: If you require access to full text of article, please inquire by email]
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A Model for Value-Based Provider/Payer Partnerships - A white paper report by Optum, released 2012.
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Health Policy Brief: Accountable Care Organizations- Health Affairs, 7/27/2010 The latest Health Policy Brief from Health Affairs describes the accountable care organizations (ACO) concept as defined in the federal legislation and examines the challenges and opportunities facing health systems, physicians, administrators, insurers, patients, and policy makers as ACOs take shape. The health care reform legislation enacted earlier this year authorizes Medicare to contract with accountable care organizations, or ACOs, to provide care for enrollees. Accountable care organizations are designed to focus on delivering care to a particular population of patients, with an emphasis on improving their health and reducing the rate of growth of health care costs.
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States Are Moving Forward with Reforms to Shift Primary Care into Patient-Centered Medical Homes, by Mary Takach of the National Academy for State Health Policy.
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Accountable Care Organizations May Have Difficulty Avoiding the Failures of Integrated Care Networks of the 1990s, by Lawton Burns and Mark Pauly of the Wharton School of the University of Pennsylvania.
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Advancing Accountable Care: A Proposed Framework for Evaluating ACO Formation, Implementation, and Performance, by Elliott Fisher of the Center for Population Health at the Dartmouth Institute for Population Health and Clinical Practice and coauthors.
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Advancing Accountable Care: Insights from the Brookings-Dartmouth ACO Pilot Sites, by Bridget Larson, formerly of the Dartmouth Institute for Health Policy and Clinical Practice, and coauthors.
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Many Accountable Care Organizations Are Now Up and Running, If Not Off to the Races, by Harris Meyer, a freelance writer based in Yakima, Washington.
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A Collaborative Accountable Care Model in Three Practices Showed Promising Early Results on Costs and Quality of Care, by Richard Salmon of Cigna HealthCare and coauthors.
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How One Academic Health Center Is Finding Its Place As an Accountable Care Organization, by Alfred Tallia and Jenna Howard of the Robert Wood Johnson Medical School.
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Pioneer ACOs, Pioneer ACO Model factsheet.
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The Challenge and Opportunity of Accountable Care: Insights from ACO Pioneers, The transition from fee-for-service to a more “accountable” healthcare system seems inevitable, especially given the broad support for value-based reimbursement among commercial payers. Leading provider organizations, however, are divided on the right response. The most widely embraced answer so far has been the Accountable Care Organization (ACO). Allscripts Chief Medical Officers Doug Gentile, MD, and Tobias Samo, MD recently reviewed the challenge and opportunity of developing an ACO with Oliver Wyman and six provider organizations. This executive brief provides their insights addressing physicians, hospitals, payers and patients will help provider organizations construct a common culture that supports the creation of value for everyone. Modern HealthCare, Posted 7/11/0212
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The Bridge to Accountable Care Organizations - One of the key elements of healthcare reform has been to encourage hospitals, health systems, physicians, and health plans to integrate resources to provide more efficient, cost-effective healthcare. With gaps in guidance on what exactly an ACO should be, healthcare organizations have forged ahead with a myriad of strategies around clinical integration to create the foundations for accountable care. Article by HealthLeaders Media, April 2011.
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The Leap to Accountable Care Organizations. Article by HealthLeaders Media, April 2011.
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Twenty-seven State Debate ACO-Related Bills, but Just Ten Enact Laws. From ACO Business Monthly , a monthly newsletter on the latest industry actions to design and create ACOs. "Nationwide, AAFP reports that 23 states are considering legislation to define, study, promote or create demonstration programs for ACOs: Arkansas, California, Colorado, Connecticut, Florida, Idaho, Illinois, Indiana, Iowa, Maryland, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, Oregon, Tennessee, Utah, Vermont, Washington and Wyoming. Texas also is exploring ways in which accountable, coordinated networks could bring greater cost control and quality to the health care system."
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Read the full Brief: Accountable Care Organizations: Implications for Antitrust Policy March 2010 [19 pages, PDF]. "The Patient Protection and Affordable Care Act authorized Medicare to contract with accountable care organizations (ACOs), or networks of hospitals, physicians and other providers that work together to improve the quality of health care services and reduce costs for patients. This brief from The George Washington University School of Public Health and Health Services examines the antitrust implications of physicians and hospitals joining forces to form a single delivery organization. Authors Taylor Burke and Sara Rosenbaum conclude ACOs are in keeping with longstanding antitrust policies. The brief is the second in a series pertaining to antitrust law."
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Massachusetts Inches Toward ACO Model, Cora Nucci, for Health Leaders Media (c) , September 29, 2010. "Massachusetts, the first state to adopt near-universal healthcare coverage is out in front of healthcare reform once again. This time, the idea is to revamp the reimbursement system for physicians and hospitals, from the current fee-for service model to a global payments model (aka bundled payments). This is a key step toward adoption of the accountable care organization model, which is getting a lot of attention from both providers and payers, even though it is still loosely defined and largely untested."
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The Health Reform (Almost) Everyone Loves. Michael L. Millenson, President of Health Quality Advisors LLC, Oct 14, 2010-Kaiser Health News. "Bringing together providers to take responsibility for meeting specific quality and cost goals related to care across the spectrum, unquestionably symbolize the kind of change the IOM was asking. Whether the enthusiasm for the concept in theory will be justified by the ACOs in practice is the larger question remaining to be answered."
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Shared Savings Program for Accountable Care Organizations: A Bridge to Nowhere? Robert A. Berenson, MD - The American Journal of Managed Care. "Accountable care organizations (ACOs) have emerged over the past 2 years as the newest big thing in healthcare. Hospitals, physician organizations, community health centers, and lots of other organizations are holding strategic planning meetings to figure out how to get some of the ACO action that the Patient Protection and Affordable Care Act promises."
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ACO Business News:Timely News and Business Strategies on Accountable Care Organizations. "While lots of hurdles remain, accountable care organizations have tremendous potential to drive radical near-term change in health care delivery and reimbursement. ACO Business News is a brand-new hard-hitting monthly newsletter on the latest industry actions and HHS news for hospitals, physicians, health plans and their advisers."
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Insurers Clash With Hospitals And Doctors Over ACO Rules. "The new health law encourages doctors, hospitals and insurers to team up in treating patients, but these groups already are at odds as they urge the government to set rules protecting their financial interests. At issue are "accountable care organizations," which the Obama administration hopes will spring up around the country, initially treating Medicare patients but eventually other people as well. Networks of doctors and hospitals would coordinate patient care and earn bonuses if they save Medicare money and meet quality targets. The goal is to impose efficiency on a health system that now fosters disjointed and excessive medical care, driving up costs."
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Affordable Care Act gives providers new options to better coordinate health care: New Accountable Care Organization models will improve patient care, could save Medicare up to $430 million- Centers for Medicare and Medicaid Press Release, 5/17/11.
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CMS Launches a Multi-Payer ACO Effort- Health Data Management, 9/28/11.
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Oregon Wants To Grade Its ACOs- Kaiser Health News, 10/19/11.
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Accountable Care Organization for PPO Patients- Challenge and Opportunity in California- Integrated Healthcare Association White Paper, 2011.
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ACO Activity Assessment, An infographic produced by HIN, Inc. September 2012
CMS has issued final regulations related to the use of Accontable Care Organizations, effective November 2011.
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CMS ACO Final Rule - Click Here
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CMS and HHS Office of Inspector General (OIG) Joint Interim Final Rule - Click Here
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FTC-DOJ Final ACO Antitrust Policy Statement RE Stark and Anti-kickback Laws - Click Here
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Internal Revenue Service Guidance for Tax-exempt Organizations Seeking to Participate as ACOs - Click Here
Other Reports of Note
Taking the Pulse of Colorado’s Medicaid Accountable Care Collaborative Initiative – Part 1, by Milliman, Jon Shreve, FSA* - September 30, 2010 The Colorado Advisor is a monthly publication by Denver Health Practice of Milliman. Jon Shreve is the leader of this practice and a consulting actuary. [EXCERPT]
"The state of Colorado Department of Health Care Policy and Financing (HCPF) recently released an RFP (Request for Proposal) for seven Regional Care Coordination Organizations, or RCCOs. These are part of a new program for the delivery and payment of Medicaid services in the state, called the Accountable Care Collaborative (ACC). The ACC is comprised of seven RCCOs and one Statewide Data and Analytics Contractor (SDAC), and it aims to improve outcomes and reduce costs for the state’s Medicaid population.
RCCOs will likely be existing non-profit clinics, provider groups, or care management organizations operating here in Colorado (managed care organizations are specifically excluded). Becoming an RCCO may be a good opportunity for an organization with experience providing and coordinating care for the Colorado Medicaid population It will have a tight budget in the first year, but after year one there are interesting financial opportunities for an organization aiming to help Medicaid patients thrive."
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About this NCSL project
NCSL’s Health Cost Containment and Efficiency Series will describe two dozen alternative policy approaches, with an emphasis on documented and fiscally calculated results. The project is housed at the NCSL Health Program in Denver, Colorado. It is led by Richard Cauchi (Program Director) and Martha King (Group Director) with Barbara Yondorf as lead researcher.
NCSL gratefully acknowledges the financial support for this publication series from The Colorado Health Foundation and Rose Community Foundation of Denver, Colorado.
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