Jason Henderson, D.O., J.D.
Medical Affairs Liaison
What is an ACO?
Accountable Care Organizations (ACOs) are groups of
doctors, hospitals, and other health care providers, who come
together voluntarily to give coordinated high quality care to their
The goal of coordinated care is to ensure that patients (especially
the chronically ill) get the right care at the right time, while
avoiding unnecessary duplication of services and preventing
When an ACO succeeds both in both delivering high-quality
care and spending health care dollars more wisely, it will share in
the savings it achieves for the Medicare program.
ACOs and Risk Shifting
The ACO places a degree of financial responsibility on the providers in hopes of
improving care management and limiting unnecessary expenditures, while
continuing to provide patients freedom to select their medical services.
The success of the ACO model in fostering clinical excellence while
simultaneously controlling costs depends on its ability to "incentivize
hospitals, physicians, post-acute care facilities, and other providers involved to
form linkages and facilitate coordination of care delivery."
ACOs have been compared to health maintenance organizations (HMOs), but
ACOs are different in that they allow providers much freedom in developing the
ACO infrastructure. Any provider or provider organization may assume the
leadership role of running an ACO. The ACA does not explicitly designate any
provider to that role.
The ACO is accountable to the patients and the third-party payer for the
quality, appropriateness, and efficiency of the health care provided.
ACOs Impact on Pharm
Adoption of best practices and establishing treatment
guidelines will mean physicians have less autonomy over
their prescribing practices.
Physicians will also have a vested financial vested in
prescribing cost effective treatments, complying with
formularies, and following recommended treatment
guidelines established by the ACO.
This will make it more difficult for pharmaceutical
representatives to directly influence prescribing of
products not supported by ACOs.
Managed Medicaid & Risk Shifting
Some policymakers have recently proposed placing a “per capita
cap” on federal Medicaid funding:
The federal government would no longer cover a fixed share of each
state’s overall Medicaid costs.
Would limit each state to a fixed dollar amount per beneficiary.
A per capita cap would represent a fundamental change in
Medicaid’s financing structure
Would shift significant fiscal risks and costs to states
Would likely lead states to impose substantial cuts over time on
low-income beneficiaries and health care providers.
See, for example, H.R. 5979 (the Medicaid Accountability and
Care Act of 2012), introduced by Representative Bill Cassidy (R-
FFS vs. Managed Medicaid
A fee-for-service (FFS) delivery system is where health
care providers are paid for each service (like an office visit,
test, or procedure).
States have traditionally provided patients Medicaid
benefits using a FFS system.
Over the past 15 years, states have more frequently
implemented a managed care delivery system for Medicaid
Managed Care Organizations (MCOs), like HMOs, agree to
provide most Medicaid benefits to people in exchange for a
monthly payment from the state.
Benefits of a Managed Care
States and enrollees have enjoyed numerous benefits
of Medicaid managed care over fee-for-service (FFS)
Access and care coordination
Delivery system innovation
Fraud and abuse prevention
Quality assurance and improvement
The New Pharm Frontier
With clinical data driving outcome studies, payers are gaining
greater power over physicians. Coupled with less tangible
innovation, the result is that the industry’s historical “innovation
frontier” will be replaced by an “efficiency frontier.”
Cost-conscious payers are diving into data on performance to
determine which treatments get approved for reimbursement. In
addition, regulatory scrutiny is amplifying.
The unique dynamics of the Pharm industry have traditionally
placed a huge burden on the R&D function, but the pressures of
today’s marketplace are making that burden unsustainable.
Recommendations to Pharm
The new context of risk shifting mandates
that the pharmaceutical industry adapt by:
Collaboration to form strategic
Develop a risk management mindset
Make information transparent
*further explanations of this tri-pillar approach are
detailed in the attached memorandum*
Gold J. Accountable Care Organizations, Explained. Kaiser Health News, NPR. Jan 18,
2011. http://www.npr.org/2011/04/01/132937232/accountable-care-organizations-explained (accessed
on March 19, 2013)
McClellan M, McKethan AN, Lewis JL, et al.(2010). A National Strategy to Put Accountable Care Into
Practice. 29. pp. 982=990.
Patient Protection and Affordable Care Act of 2010, Pub. L. No. 111-148, §3022 124 (2010).
McClellan, M, et al. A National Strategy to put Accountable Care into Practice. Health Affairs. 29(5).
Berwick DM. Making good on ACOs’ promise – the final rule for the Medicare Shared Savings Program.
N Engl J Med 2011; 365:1753-6
Health Policy Brief: Accountable Care Organizations. Health Affairs, July 27, 2010.
Medicare Payment Advisory Commission. (2009). Report to the Congress—Improving Incentives in the
Medicare Program."MedPac. p.39-56
(accessed on March 19, 2013)
Sisk JE, Gorman SA, Reisinger AL, et al. Evaluation of Medicaid Managed Care: Satisfaction, Access,
and Use. JAMA. 1996;276(1):50-55.