The Whats, Whys, and Hows of Accountable Care Organizations (ACOs)?

An ACO is a local health care organization and a related set of providers (at a minimum, primary care physicians, specialists, and hospitals ) that can be held accountable for cost and quality of care delivered to a defined population.

Definition of Accountable Care Organization

A friend, a patient interested in health reform, asked: “Accountable health organizations are the rage. They’re hot, but what the hell are they?”

My short answer was,”ACOs are different ways of herding doctors together to make them behave economically.”

He was not satisfied with that. He said, “Be specific.”

I replied, specifically, with this physician herd list.

• Independent practice associations (IPAs)
• Multispecialty groups
• Hospital medical staff organizations
• Physician hospital organizations
• Organized and integrated delivery systems
• Virtual extended hospital medical staffs

My friend persisted, “Why herd doctors together?”

"That’s easy," I said, “If all the doctors who take care of you – your primary care doctor, specialists, and your hospital – work together financially, you will get better care, and it won’t cost as much.”

“Why?” queried my friend.

I replied, “To keep Medicare from going bankrupt.”

“But how?” said he.

I gave him this laundry list.

1. By keeping people healthier across care boundaries
2. By educating people to their risks and reducing costs to high risk older patients through the use of clinical teams
3. By forcing doctors and hospitals to work under a budget and to manage resources
4. By paying doctors under different arrangements, e.g. salaries, rather than fee-for-service, which encourages them to do more

“That’s not good enough,” he said, “Be more specific.”

“OK, I countered, “ I’ll try. “How is this?”

1. To bring down Medicare costs, so you will have Medicare in your old age.
2. To shift costs and accountability for care away from insurance plans to doctors and hospitals, where actual costs occur.
3. To gain the cooperation of doctors and hospitals by having them share in savings produced by ACOs.
4. To pay doctors in such a way that they will not treat you in what they regard as their and your best interest but in the best interest of quality and cost to the system.

My friend was dubious. He pressed, “But how do ACOs work? Will they save money and raise quality?”

I replied, “ I do not know. ACOs have great promise, but obstacles as well.

• Doctors treasure their autonomy and do not like to be “bossed”, even by peers.
• Doctors are skeptical about being paid and rewarded for not delivering care.
• Doctors fear getting stuck with high risk patients with irreversible conditions over which they have little control and for whom they care, may be asked to take a financial bath.
• Doctors may regard ACOs as capitated HMOs in drag, a failed cost-savings approach that made everybody miserable.”