Everything You Need to Know About Accountable Care Organizations

Accountable care organizations are the next big thing on the health care horizon, and the rush to implement them is already underway. Yet many clinicians – including most nurses – have no idea what this initiative is designed to accomplish or how it will affect them personally.

The good news is this: it seems very likely that the accountable care organization (ACO) will provide expanded opportunities for nurses to become managers of care rather than just providers of care; knowledge workers rather than task workers.

So how do you position yourself for the future as this new model of care evolves? The first step is to understand the concepts, policies and economic principles that the ACO model is based on.

The basics of accountable care organizations

The new health care reform law (which is actually called the Patient Protection and Affordability Act, or PPACA) devotes seven pages to a pilot program that establishes ACOs. It requires that all health care systems become ACOs, in order to continue receiving Medicare reimbursements.

The bad news is this: no one knows yet exactly what an ACO will look like. The Centers for Medicare and Medicaid Services (CMS) is expected to issue specific guidelines by February, 2011.

But basically, an ACO is a network of doctors, hospitals, and ancillary providers that will share the responsibility of providing care to all the patients enrolled with them. The new law says that ACOs must manage the care of at least 5,000 Medicare beneficiaries for a three-year term.

During this fixed, three-year term, the ACO will receive a fixed payment for each Medicare patient enrolled with it. Since the various providers within the ACO are jointly responsible for the patient, they will be expected to share that bundled payment. The payment will be based on the average, expected health care utilization of each patient, but no one knows yet how that payment will be determined, or how much it will be adjusted upward for patients with chronic illness. This will replace the fee-for-service model that Medicare currently uses to pay providers.

Economic incentives of accountable care organizations

Fee-for-service has been criticized for rewarding a high volume of care, because providers get paid for every test and procedure they order. Often, a poor outcome results in more care, which results in higher revenues for the provider – and an increased burden on the Medicare budget.

With the ACO model, providers must bear some financial risk for the patients they treat. Since they receive a flat fee for all of the patient’s needs, each visit or procedure essentially costs them money, detracting from the sum they can realize as profits.

It’s believed this payment model, also known as capitation, will give physicians an incentive to keep patients healthy, minimizing costly episodes and hospitalizations. It’s also hoped that the providers who must share the bundled payment will have greater incentives to coordinate care among themselves – currently there is little collaboration between primary care providers, specialists, and hospitals.

The Congressional Budget Office estimates that ACOs could save Medicare $5 billion by the end of this decade, and some of that savings would be passed on to providers as a bonus. An ACO that keeps total spending beneath a certain benchmark, while meeting specific quality benchmarks like low rates of hospital re-admissions, would receive extra bonus payments.

Implementing the ACO model

Obviously then, an ACO needs broad resources to coordinate all aspects of care for its enrolled patients. Large hospital systems are currently in a race to buy up physician group practices, so they can become ACOs that directly employ many kinds of health care providers. Large insurers like Aetna and Humana have also announced plans to form their own ACOs.

The pilot program is set to begin in January, 2012. While the law focuses on Medicare and Medicaid patients, those with private insurance may find themselves enrolled in an ACO as well.

To increase cost savings, ACOs will need to emphasize evidence-based practices. They’ll have to implement systems that track quality and cost measures. And they will undoubtedly have a growing need for nursing case managers and utilization review specialists.

What does all this mean for nurses? ACOs will most likely be structured in ways that facilitate greater nursing leadership. The American Nursing Association (ANA) has already responded to a CMS request for feedback on how ACOs should be structured. It sees ACO’s as a “new frontier in creating an engaging, patient-centered, quality delivery system” and it stresses a need for nursing case managers.

Over the next few weeks, we’ll be looking at ACOs more in depth, with an analysis of what they’ll mean to the nursing workforce. Please participate in the discussion. See our article on the pitfalls of accountable care here.