ACOs: A system that can deliver on the goals of healthcare reform Print
Written by Todd Demel   
Friday, 19 November 2010 15:43

The Concept

The recently enacted Affordable Care Act establishes a Medicare shared savings program for Accountable Care Organizations (ACOs) to take effect no later than January 2012. The law makes contracts with ACOs a permanent option under Medicare, the specifics of which will be left to the discretion of the secretary of the Department of Health and Human Services (HHS). 

ACOs are changing the way physicians and hospitals are providing care. Through an ACO's delivery system, provider groups accept responsibility and become accountable for the cost and quality of care delivered to a defined population of patients. ACOs can increase patient satisfaction and potentially lower costs by improving the coordination and efficiency of care. Currently being promoted by our Administration as a system that can deliver on the goals of healthcare reform, ACOs emphasize health and wellness in contrast to our current system that is primarily structured to treat illness. Through payment systems developed by the Centers for Medicare & Medicaid Services (CMS), primary care physicians, specialists, and hospitals assume varying degrees of financial risk and will be rewarded for achieving quality and spending goals. Although much of the discussion about ACOs has been in the context of Medicare, there is growing interest in extending the concept to patients covered by Medicaid as well as private insurance. 


Findings suggest that there exists wide variation in the cost of care across the country, and that the regions that spend more per patient do not necessarily obtain better outcomes. This would seem to put into question whether there is a correlation between the cost, and quality of care. While it acknowledges the valuable role that primary care clinicians play in patient health and well-being, The Dartmouth Institute Atlas Study suggests that such care can be negatively impacted by episodic delivery that is not coordinated with specialists and hospitals. So, merely increasing access to care may not in itself be enough to improve health outcomes. Rather, care is most effective when it is part of a high-functioning system where physicians communicate with each other and ongoing feedback encourages continual improvement (for a copy of The Dartmouth Atlas report, please send a request to

Working Together

ACOs must have a formal legal structure. However, it is envisioned that ACOs will take the form of "virtual" organizations consisting of physicians and other professionals in groups or networks of practices, hospital-physician partnerships, and multispecialty groups. Such organizations may be either associated or directly affiliated with local hospitals through their inpatient work, or through the care patterns of the patients they serve.  The group practices that are coordinated around local hospitals come to serve as an "extended hospital medical staff" thus improving quality and lowering cost by fostering greater accountability. Within this scenario, physicians become more involved with the managing of care across the continuum of different institutional settings. Part of this process involves the prospective planning of budgets with respect to resources and needs, and the ACO must be of sufficient scale that it supports comprehensive and reliable performance measures.  


If successful, ACO members will share in the savings that are achieved through cooperation, the coordination of care, the sharing of resources, and improved bargaining power.  ACOs provide the opportunity to establish value-based rather than volume-based incentives thus leading to improved beneficiary outcomes. The hope is that, ultimately, the ACO model will help to combat overutilization and overbuilding of healthcare facilities and technology. The keys to the success of this model lie in transparency of execution and a spirit of inquiry.

Looking Ahead

Among the goals of healthcare reform is encouraging integrated care within the US healthcare system so that increased levels of coordination can be achieved. In an integrated system, primary care physicians, specialists, and hospitals work together to manage the overall care of their patients thus encouraging and enabling the sharing of patient information and adherence to uniform practice guidelines. Payors can hold such organized systems accountable by assessing the quality of care provided as well as whether or not there has been any unnecessary use of resources. And financial rewards for good performance based on comprehensive quality and spending measurement will serve to further encourage ongoing efforts and a steady revolution towards fully coordinated systems. It is hoped that ACOs will avoid some of the problems associated with past efforts involving capitation and managed care. However, given the details and design that still need to be established, the ACO model can be expected to evolve gradually, over time.

About the Author:  Mr. Demel is the Senior Executive of Physician Management Services at MF Healthcare Solutions.  For more information, please visit: or contact Todd Demel at (954) 475-3199.
Last Updated on Wednesday, 24 November 2010 10:45