Summary    Can Accountable Care Organizations Improve the Value of    Health Care by Solving the Cost and Quality Quandari...
engage with the ACO, but                  will support what they value in health          Implementation    independent an...
•   The ACO model that is receiving the        Conclusion                                     Lessons from previous reform...
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  1. 1. Summary Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries? Timely Analysis of Immediate Health Policy Issues October 2009 Kelly Devers and Robert BerensonIntroduction type of incentive system, an ACO needs Five issues under to be able to:One of the major issues being debated in discussioncurrent health reform discussions is how • Care for patients across the Although authors and legislativeto slow rising health care costs and still continuum of care, in different proposals describe the broad outlines ofachieve quality health care for patients. institutional settings. the ACO concept, policy-makers arePolicy-makers have discussed debating many specific program optionsaccountable care organizations (ACOs) • Plan, prospectively, for its budgets and resource needs. and design features. Decisions aboutas tools to slow rising health care costs these options and features will affect:and to improve quality in both the • Support comprehensive, valid andtraditional Medicare program and in • The shape of the ACO program. reliable measurement of itsprivate insurance programs. A new performance.policy brief released today by the Urban • Its implementation: scale, pace,Institute and the Robert Wood Johnson challenges, and necessary supports.Foundation provides a comprehensive What is new about thelook at ACOs. ACO concept and • Short and long-term outcomes in proposals? cost reduction and qualityThe following is a brief summary of the improvement.areas covered in the policy brief, which ACOs make the people and organizationscovers: that actually provide care accountable for Five key issues are being discussed: the quality and the cost of that care.• The definition of an ACO 1. How ACOs will be designed. Previous health reform initiatives involved insurers and made them 2. Whether provider participation will• Design issues that still need to be ultimately accountable. The concept be voluntary or mandatory. tested and resolved driving ACOs is that it is providers, not• Implementation challenges insurers, who are best placed to make the 3. How patients will be brought into an changes that will address the cost and ACO.• Reasons for skepticism. quality problems resulting from the U.S.’s current system of fragmented 4. What provider payment method care, variation in practice patterns and should be used.What is an ACO? volume-based payment systems. 5. How quality will be assessed.An ACO is a local health careorganization and a related set of Current proposals for ACOs allow greatproviders (at a minimum, primary care flexibility in both the types of ACO design questionsphysicians, specialists, and hospitals) organizations that could serve as an ACO and the methods by which providers Legislative proposals in the House andthat can be held accountable for the cost Senate define ACOs quite broadly,and quality of care delivered to a defined would be paid. This flexibility allows local markets to develop ACO primarily because there is no consensuspopulation. over a number of design issues, organizational models and paymentThe goal of the ACO is to deliver approaches that match the nature, suggesting the need for testing variouscoordinated and efficient care. ACOs strengths and weaknesses of those local ACO approaches. Design questionsthat achieve quality and cost targets will markets – making it more likely that the under discussion include:receive some sort of financial bonus, and ACO will work. • Must an ACO be physician-led?under some approaches, those that fail Physician decisions drive mostwill be subject to a financial penalty. In health care services (and costs), soorder to meet the requirements of this certainly physicians must actively
  2. 2. engage with the ACO, but will support what they value in health Implementation independent and small group care: strong relationships with their practices may not be large enough to health professionals, sufficient freedom challenges be held accountable for the quality of choice of provider, and access to the There are additional issues involved in and cost of care across the health care services that they and their the implementation of ACOs that go continuum of care. physicians determine they need, beyond the specifics of any given consistent with evidence-based medicine. program. The two most critical involve:• What other types of provider If patients come to view ACOs as solely organizations may or must be a cost-control measure, political support • The participation of, and impact included? Should hospital for the concept will likely evaporate. on, private payers. Do ACOs participation be mandatory? Can provide potential value for self- collaboration between physicians Provider payment funded employers and commercial and hospitals be achieved in most communities? methods and financial insurers, as well as for the Medicare incentives program? Some purchasers and plans are concerned that the• What specific ACO qualifying The current House legislative proposals enhanced collaboration between criteria should govern participation? propose two very different types of ACO physicians and hospitals within a Should there be size or structural payment methods for Medicare: a shared geographic area could increase minimum requirements? Can the savings program (SSP) based on fee-for- providers’ market power and result concept of a “virtual ACO” in a service payments, and partial capitation – in higher costs to payers. local delivery system be sustained? based on what some call population- based payment (PBP). The legislation • New roles and responsibilities for• Do patient-centered medical homes calls for each to be pilot-tested. As with providers and for government complement, or conflict with, other elements of ACO design, there are agencies. ACOs are a new type of ACOs? strongly held differences of opinion on organization, and will require provider organizations to developVoluntary or mandatory which approach is likely to be more new skills: skills to support both theprovider participation successful and under what circumstances. development of new ways of providing care and the ongoingOn the one hand, voluntary ACO operation and management of theprograms offered by established Assessing quality new entities. ACOs will need theorganizations might initially have a capacity to support cultural change,higher likelihood of success and require As already emphasized, ACOs seek to improve value, that is, the relationship of teamwork, health informationfewer resources to administer its impact technology, and care managementon health care delivery across the quality to cost, so both costs of care and the quality of care need to be measured. process redesign and improvement,country. On the other hand, a mandatory while also strengthening managerialprogram, that is, based on assigning Possible methods for measuring quality have been proposed: perhaps a weighted and physician leadership.providers to an ACO based on patterns ofcare available from claims data analysis, single score, or performance on a proven set of quality indicators. But the specific Reasons for skepticismwhile challenging to administer – wouldhave broader scope and offer greater measures have not yet been defined. As ACOs have drawn increasedpotential for generating savings and Also, the ACO will need to be able to attention, some experts have highlightedimproving quality – assuming providers assess its overall quality, rather than the reasons why the concept is not likely toprove willing to alter practice patterns on quality of individual physicians or other succeed. They assert:a broad scale. providers. This will require measures that capture issues in care coordination • Previous attempts to manage care,Patient participation: across providers; issues that an ACO (as via risk-bearing providerpassive or active? opposed to individual physician organizations that imposed practices) actually could work to restrictions on patients’ freedom ofShould patients elect to participate in an improve. A benefit to measuring quality choice, failed miserably, due both toACO or should they be assigned based at the ACO-level is that enough data will the serious problems of executionupon their patterns of care? Should their be available to have statistical validity. that plagued these organizations andfreedom of choice be limited or also to employers and patientsinfluenced in any way? In order for ultimately preferring open panelsACOs to be successful, patients will need managed by health insurers to closedto be confident that the ACO program panels managed by providers. Timely Analysis of Immediate Health Policy Issues 2
  3. 3. • The ACO model that is receiving the Conclusion Lessons from previous reform efforts can most attention now – the shared help resolve the legal and regulatory saving payment approach that does The way health care is currently paid for issues ACOs face and provide insight not restrict patient choice or require in the United States, especially in the into the trade-offs among program any providers to take financial risks traditional, fee-for-service Medicare options. Current legislative proposals – also is inherently flawed. In many program, does not support coordinated envision pilot tests of the ACO concept, medical markets, the physician care and the establishment of a delivery ensuring that Medicare policy-makers community has drawn away from system with appropriate capacity and will be able to learn from experience and the hospital and functions utilization. Proposals for ACOs seek to make program modifications as increasingly independently on a day- address this situation. necessary. In such a scenario, the to-day basis. The weak financial potential benefits of ACOs surely incentives in the SSP payment Many important questions remain, outweigh the risks; the concept deserves model will not bring together these however, as to exactly how ACOs should a chance, although expectations of increasingly independent be structured, given the culture of health immediate success should be tempered. professionals. care, existing legal requirements, political realities and the legacy of previous attempts at payment reform.The views expressed are those of the authors and should not be attributed to any campaign or to the Robert Wood JohnsonFoundation, or the Urban Institute, its trustees, or its funders.About the Author and AcknowledgementsKelly J. Devers, Ph.D., is a Senior Fellow and Robert A. Berenson, M.D., is an Institute Fellow at the Urban Institute.This research was funded by the Robert Wood Johnson Foundation. The authors thank Stan Dorn and John Holahan for theircomments and suggestions.About the Urban InstituteThe Urban Institute is a nonprofit, nonpartisan policy research and educational organization that examines the social, economic, andgovernance problems facing the nation.About the Robert Wood Johnson FoundationThe Robert Wood Johnson Foundation focuses on the pressing health and health care issues facing our country. As the nation’s largestphilanthropy devoted exclusively to improving the health and health care of all Americans, the Foundation works with a diverse groupof organizations and individuals to identify solutions and achieve comprehensive, meaningful, and timely change. For more than 35years, the Foundation has brought experience, commitment, and a rigorous, balanced approach to the problems that affect the healthand health care of those it serves. When it comes to helping Americans lead healthier lives and get the care they need, the Foundationexpects to make a difference in your lifetime. For more information, visit www.rwjf.org. Timely Analysis of Immediate Health Policy Issues 3

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