Healthcare Practice Strategies – Spring 2012 - The ACO Movement: Look Before You Leap into Accountable Care

The final rule for the Centers for Medicare and Medicaid Services’ (CMS) Accountable Care Organization initiative (aka the Shared Savings Program) is incredibly complex. Much of the practical, day-to-day details of implementing accountable care at the practice level are still unclear (“murky-but-moving” is how some have described the process).


Still, hospitals and physicians are moving ahead to form collaborations. In fact, 58 percent of primary care physicians expect to eventually join an accountable care organization (ACO), with 44 percent expected to make the move within the next three years, according to the results of a recent survey in Medical Economics.

In particular, many of these collaborations are crystallizing around hospital systems, faculty practices and Independent Practice Associations (IPAs). The rationale is certainly compelling: Allying with fellow physicians and others in an ACO might be a good way to preserve — or even increase — income, especially as the traditional fee-for-service system comes under increasing attack.


At its most basic, the Medicare Shared Savings Program will allow four types of entities to create ACOs:

  1. Physicians in a group practice arrangement
  2. Physicians in independent practice associations
  3. Hospitals that employ physicians
  4. Partnerships or joint venture arrangements between hospitals and physicians

Approved entities must agree to participate for three years. They also must be accountable for the quality, cost and overall care of Medicare beneficiaries assigned to them; have sufficient numbers of primary care physicians to meet the patients’ needs; and have defined processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care.


There are plenty of questions to ask before offering your services to an ACO. Yet, the best advice may simply be to look for organizations that exhibit some basic characteristics of success, such as:

  • A willingness to invest in health information technology. A robust IT infrastructure is critical for managing patient information across multiple sites of care. This will require electronic health records and health information exchange to manage care and share information in real time.
  • A commitment to measurement and reporting. An ACO must monitor quality and cost and then report that data to the payer, whether this is an employer, patient or health plan. The ACO must have defined processes to set quality benchmarks and measure performance indicators.
  • An acceptance of alternative payment methods. Ultimately, payment methodologies should be designed to bring about “value-based” payments, in which physicians and other providers receive traditional fee-for-service payments, with physicians getting a share of any savings generated. 
  • A focus on evidence-based medicine. ACOs are required to have defined processes for promoting evidence-based medicine (which can include clinical guidelines and decision support tools) utilizing current, credible and objective evidence about what tests and treatments work.


Joining an accountable care organization isn’t a step to be taken lightly. When a hospital or integrated delivery network asks you to join its ACO, make sure you get the answers to these five critical questions: 

  1. Who will lead? CMS rules call for active, inclusive management of any ACO. At least 75 percent control of an ACO’s governing body must be held by ACO participants, including at least one Medicare ACO system patient. So look for an organization committed to an effective, representative system of governance. Likewise, consider where you fit into it all - for example, what are your own capabilities and desires for leadership?
  2. How will savings be shared? The ACO concept is all about shared savings. If, for example, primary care physicians as a category are to receive a portion of the payments, then any agreement should spell out how allocations will be made to each provider (e.g., through utilization and outcome measurement).
    Conversely, there should be a mechanism in the agreement that penalizes over-utilization. For example, doctors who are overprescribing and overusing services shouldn’t receive the same portion of the shared savings.
  3. Are the right providers in place? To ensure success, the ACO must cover the entire continuum of care - primary care, acute care and post-acute care services. Certainly, specialty physicians will be required, but the onus will be on primary care providers. ACOs must be able to care for a minimum of 5,000 Medicare beneficiaries, which means they must have enough primary care physicians to serve the patient population. Best estimates translate this to approximately 5-20 primary care physicians. 
  4. What’s the risk model? The ACO can enter into a one-sided or two-sided shared savings agreement. Under a one-sided risk model, an ACO that creates savings of at least 2 percent would get 50 percent of the money above that threshold, but it would have no penalty if it spent more in the first and second year. Under the two-sided model, an ACO could receive 60 percent of the money above the threshold but would also be penalized if it led to higher costs. By the third year of the program, all ACOs would become responsible for losses.
  5. Is there a way out? CMS rules dictate that an ACO must commit to the Medicare Shared Savings Program for at least three years. But it is not clear how long individual providers must commit. Here, you may want to hedge your bets and make any commitment short-term (e.g., the initial three years).

However, if participation requires a considerable up-front investment, you may want to commit to a longer relationship. Regardless, you’ll want to at least have thought out an exit plan - and any repercussions for leaving.

As questions inevitably arise about the appropriateness of the ACO model for your practice, we hope you’ll turn to our experienced professionals for guidance. 


7 Things You Can Do to Prepare

  1. Get meaningful about EHR. If you don’t have one already, obtain a meaningful use-certified electronic health records (EHR) system and start using it in meaningful ways.
  2. Start measuring performance. Start tracking your performance on Healthcare Effectiveness Data and Information Set scores, customer satisfaction, etc.
  3. Crunch the numbers. Compare your practice data (e.g., utilization) against metrics from the American Health Care Association, federal government data sites, managed care organizations, independent practice associations and hospitals you use.
  4. Bone up on Medicare compliance. Take compliance very seriously. Work with managed care specialists and experts in Medicare regulations to get on track. 
  5. Create synergies. Look for opportunities to work with specialists in your area to create a team approach to patient care.
  6. Study the market. Study successful providers in your market - and learn from them. 
  7. Focus on quality. Last of all, focus on practicing good medicine and providing excellent service to your patients.

Healthcare Practice Strategies – Spring 2012 

Blog: Medicare Accountable Care Organization (ACO) Update 

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