ACOs: The New Rx for Health Care Delivery?

Many of the estimated 27 million people in ACOs aren't aware they are in one, but do notice that their doctors and other care providers seem more attentive to their needs. That's because ACOs, entities triggered by the controversial 2010 Affordable Care Act (also known as Obamacare), force hospitals, doctors and other health care professionals to rethink how they deliver care so it is more coordinated, better quality and lower cost.

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Health care providers are working together to deliver better, less expensive care.

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Medicare beneficiary James Conway, 73, has high blood pressure, a catheter that has led to several urinary tract infections and a condition that causes spinal fluid to build up in the base of his skull. In the last year, he's been in the hospital four times. Recently, the Berkley, Mass., resident says his care has gotten noticeably better. "We used to be left to our own devices to get somebody to help," he says, describing how he had to navigate between several different doctors.

Since the spring, however, pharmacists have visited Conway at home to examine his medicines, cut five from an 18-drug regimen, explain what each one does and create a spreadsheet to remind him of when to take them. They also check in weekly, as does a nurse, who helps organize his care and arranged for an aide to regularly change his catheter, something nearly impossible to get done before. "That was unbelievable for me," says his wife Kathy. "And they all leave their phone numbers with us."

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Conway is part of a so-called accountable care organization (ACO), an experiment that is transforming the way health care is delivered in America. Many of the estimated 27 million people in ACOs aren't aware they are in one, but do notice that their doctors and other care providers seem more attentive to their needs. That's because ACOs, entities triggered by the controversial 2010 Affordable Care Act (also known as Obamacare), force hospitals, doctors and other health care professionals to rethink how they deliver care so it is more coordinated, better quality and lower cost.

How? Obamacare directed Medicare, the nation's largest health insurer, to change its fee-for-service payment system, which tends to promote more tests and treatments when less care (or more preventive care, or better-coordinated care) would often produce better results at a lower cost.

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Officially a Medicare experiment, ACOs are proliferating. In the three years since Obamacare passed, hospitals, medical groups and other organizations nationwide have formed 488 ACOs, says Andrew Croshaw, managing director of Leavitt Partners, a health care consultancy that follows ACO development. "There are a lot of experiments happening in the commercial sector, too," he notes. Medicare contracts with 250 ACOs, covering more than 4 million beneficiaries; the rest of the ACOs operate under private health insurance deals covering 14 million to 23 million more people.

A Medicare beneficiary, Conway noted that his care changed when his primary care physician agreed to participate in an ACO sponsored by Steward Health Care System, a Boston-based integrated delivery network of 11 hospitals, 2,900 doctors and other health care providers caring for 1.2 million patients a year. Medicare pays Steward hospitals and doctors based on how successfully they treat 47,000 beneficiaries in Steward's ACO, with an eye toward keeping them out of the hospital in the first place.

"ACOs are very interested in reducing acute care, episodic hospitalizations," says Croshaw. "It is one of the key ways to have an ACO succeed financially." Specifically, Medicare sets quality benchmarks and spending targets for patient care. Medicare tracks ACO performance on 33 quality and performance measures, from patient satisfaction to hospital admission rates to how well ACO doctors help diabetes patients control their cholesterol. Then Medicare ACOs are given spending targets for patient care—adjusted based on the risk of each beneficiary—based on what Medicare would pay for uncoordinated fee-for-service care these patients would get in the traditional program. Only after an ACO hits Medicare-designated quality benchmarks can it share in any produced savings.

Reducing hospitalizations and readmissions is on top of the hit list for Steward, says Dominique Morgan-Solomon, director of care management at Steward. "Our objective is meeting the patients' needs and providing care wrapped around patients," she says. It's cheaper and often better to do that at a patient's home.


Corrected on : Corrected, 09/03/13: An earlier version of this article stated that Heritage California ACO sponsors social trips to Las Vegas. The ACO arranges trips to casinos in California, not Las Vegas.

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