This blog post is written by our guest blogger Mark Dengler, President of Research & Marketing Strategies (RMS), Inc., a market research company in Syracuse, NY.

Healthcare delivery is undergoing transformation with a focus on “evidence-based” care delivery. Leading the reform is the development of Accountable Care Organizations (ACO). An ACO is a group of healthcare providers (health system model) that accept accountability for the provision of patient care across the continuum of care through different settings including outpatient, inpatient, and post-acute care.

In 2011, healthcare delivery is being pushed to create a seamless integrated system of care and ACOs are being touted as the solution. By grouping a diversity of health care providers, such as a hospital, primary care physicians, and specialists, ACOs aim to create a cohesive, clinically integrated framework, encourage accountability, and create incentives to reward to providers who focus on coordinating the overall scope of patient care.

Unlike the current fragmented model, the ACO is designed to enable and encourage healthcare providers to take greater responsibility for controlling the growth of healthcare costs for a given population of patients.

Accountable Care Organizations

Simultaneously, ACOs aim to improve patient care quality.

With more than 50 percent of the population dealing with a chronic condition, the former approach to providing episodic care and treatment is no longer the most appropriate. Healthcare delivery needs to address chronic care management and clinical integration when co-morbidities exist. Care needs to be coordinated and managed. Patients also need to be engaged and must take responsibility for their overall healthcare and treatments. This means communication and collaboration need to exist among all stakeholders – patients, providers, hospitals, the community and health insurance plans. Then, a “team approach,” in which all provider staff plays a role, needs to be adopted. Providers should also work with the patient to make him/her accountable for his/her own care. Getting providers to this point is known as practice transformation.

The ACO model is intended to encourage participating primary care physicians, specialists, and hospitals to work collaboratively to ensure the care they deliver is well-coordinated and designed to benefit patients and reduce waste. It involves prevention, wellness, and episodic care through organized systems of care to keep people out of the hospital. To do so effectively, hospitals and physicians have to psychologically and culturally come to grips with making a profit based on appropriate utilization that produces savings, through managing the expense side of the profit-and-loss statement rather than the revenue side.

Effective primary care delivery is at the core of the ACO structure and the overall practice transformation falls into three, interrelated themes: Pay-for-Performance; Patient Center Medical Home; and Practice Re-engineering. Combined, these initiatives form the basis of practice transformation and, ultimately, clinical integration. This is the end state that payers, employers, and regulators are pushing for with regard to healthcare delivery systems.

Primary care physicians should look to achieve Patient Centered Medical Home (PCMH) designation; those PCPs that have acquired PCMH designation/accreditation will be in a preferred position in becoming part of an ACO. In addition, a PCP should evaluate its processes through a LEAN process review, which involves breaking down the process into component steps and validating that each step is necessary and the most efficient.

Practice transformation is not limited to PCPs. Specialists need to enhance their roles with PCPs through coordination of care and rationalization of treatments. Additionally, specialists need to create outcome documentation that details the effectiveness of treatment. This outcomes report card will need to be shared with interested parties.

The federal government is promoting ACO development and has a number of demonstrations underway. While large hospital systems are looking to create ACO structures, the government wants to see other entities take the lead. Overall, the spectrum-of-care models need to reflect a demonstration of clinical integration. Because the savings to be shared are achieved by eliminating unnecessary expenses and improving overall patient quality, the ACO model seeks to focus providers’ attention on areas of health care delivery that are fragmented, inefficient, and inconvenient for patients. Under the new ACO system, a bundled price is paid to the ACO for all healthcare services. The ACO then decides individual component payments to its member providers.

While the ACO healthcare model seems to be a significant change in the way healthcare delivery is currently provided and there are sure to be financial and professional obstacles, once implemented, the ACO should result in better care for the patient, improved payment for the provider, and less frustration for everyone. In the midst of the change, practices that have streamlined their care delivery and have adopted best practices are in the prime position to adapt to the new environment. Their practices will be looked to by others for replication.

RMS Healthcare, a division of RMS, offers focused, healthcare specific consulting and research services to health care clients. Call Mark at (866) 567-5422 or via e-mail at, to see how RMS can help you.