This article was featured in the latest edition of the RMS Quality Care Courier newsletter.

Accountable Care Organizations (ACOs) are popping up nationwide. There are 67 Medicare ACOs in 29 states from coast to coast. In addition to ACOs participating in Medicare programs, there are other programs being organized by states and payers that have enticed any number of ACOs into formation.

What is an ACO? An ACO is an organization formed by healthcare providers (hospitals, physician groups, etc.) that accept accountability for the provision of care across the continuum of care including outpatient, inpatient and post acute care for a defined patient population.

what is an aco?

As an outcome of the Affordable Care Act, healthcare delivery is being pushed to improve the quality of care and make healthcare more affordable; ACOs are being touted as the solution. By grouping a diversity of health care providers, such as a hospital with primary care physicians and specialists, ACOs aim to create a cohesive, clinically integrated framework, encourage accountability and create incentives and rewards to providers who focus on coordinating the overall scope of patient care.

One of the primary focuses of the need for better coordination of care is the need to provide a better overall quality of care for patients with multiple chronic conditions. One in four Americans (two out of three over the age of 65) are living with two or more chronic conditions. Multiple conditions often means many physicians, many tests, many medications – and without coordination of care, many duplicate services and many chances for medical errors to occur. Under an ACO, these patients would receive more coordinated, seamless and better quality care, while reducing the cost of care overall.

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 margin 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, through the Centers for Medicare and Medicaid Services (CMS) is promoting ACO development and has a number of ACO models underway – each promoting ACO development through payment structures designed to cover all of the care provided to the “covered beneficiaries” of the ACO. 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. The ACO then decides individual component payments to its member providers.

In order to monitor the outcomes of the care Medicare beneficiaries receive under the ACO model of care, CMS has established a series of 33 quality measures in four domains that ACOs will be held accountable to:

  • Patient/caregiver experience (seven measures) – measured through the CG-CAHPS® survey
  • Care coordination/patient safety (six measures)
  • Preventive health (eight measures)
  • At-risk population:
    • Diabetes (six measures)
    • Hypertension (one measure)
    • Ischemic Vascular Disease (two measures)
    • Heart Failure (one measure)
    • Coronary Artery Disease (two measures)

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 including becoming a patient-centered medical home 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.

If you are interested in discussing more or have any further questions, please contact our Director of RMS Healthcare, Susan Maxsween at or by calling (315) 635-9802.