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Accountable Care Organizations

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Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care
providers, who come together voluntarily to give coordinated high quality care to the Medicare
patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get
the right care at the right time, with the goal of avoiding unnecessary duplication of services and
preventing medical errors. When an ACO succeeds in both delivering high-quality care and
spending health care dollars more wisely, it will share in the savings it achieves for the Medicare
program.
Accountable care organizations take up only seven pages of the massive new health law yet have
become one of the most talked about provisions.
This latest model for delivering services offers doctors and hospitals financial incentives to
provide good quality care to Medicare beneficiaries while keeping down costs. A cottage
industry of consultants has sprung up to help even ordinary hospitals become the first ACOs on
the block.
Yet the concept has been short on details. ACOs have been compared to the elusive unicorn:
everyone seems to know what it looks like, but no one has actually seen one. But the health care
industry has already embarked on a frenzied quest to create them as quickly as possible. Today,
after many delays and false starts, the Obama administration proposed guidelines on how ACOs
will work.
Here is a brief guide to what we know about ACOs.
What is an accountable care organization?
An ACO is a network of doctors and hospitals that shares responsibility for providing care to
patients. In the new law, an ACO would agree to manage all of the health care needs of a
minimum of 5,000 Medicare beneficiaries for at least three years.
Think of it as buying a television, says Harold Miller, president and CEO of the Network for
Regional Healthcare Improvement and executive director of the Center for Healthcare Quality &
Payment Reform in Pittsburgh. A TV manufacturer like Sony may contract with many suppliers
to build sets. Like Sony does for TVs, Miller says, an ACO would bring together the different
component parts of care for the patient primary care, specialists, hospitals, home health care,
etc. and ensure that all of the "parts work well together."
The problem today, Miller says, is that patients are getting each part of their health care
separately. "People want to buy individual circuit boards, not a whole TV," he says. "If we can
show them that the TV works better, maybe they'll buy it," rather than assembling a patchwork
of services themselves. "But ACOs will need to prove that the overall health care product they're
creating does work better and costs less in order to encourage patients and payers to buy it."
When will ACOs begin operating?

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The ACO initiative is scheduled to launch in January 2012, but the race to form ACOs has
already begun. Hospitals, physician practices and insurers across the country, from New
Hampshire to Arizona, are announcing their plans to form ACOs, not only for Medicare
beneficiaries but for patients with private insurance as well. Some groups have already created
what they call ACOs.
Why did Congress include ACOs in the law?
As lawmakers search for ways to reduce the national deficit, Medicare is a prime target. With
baby boomers entering retirement age, the costs of the program for elderly and disabled
Americans are expected to soar.
ACOs would make providers jointly accountable for the health of their patients, giving them
strong incentives to cooperate and save money by avoiding unnecessary tests and procedures.
For ACOs to work they'd have to seamlessly share information. Those that save money while
also meeting quality targets would keep a portion of the savings. But some providers could also
be at risk of losing money.
HHS estimates that ACOs could save Medicare up to $960 million in the first three years. That's
far less than one percent of Medicare spending during that period. If the program is successful, it
can be expanded by the Secretary of Health and Human Services.
How would ACOs be paid?
In Medicare's traditional fee-for-service payment system, doctors and hospitals generally are paid
more when they give patients more tests and do more procedures. That drives up costs, experts
say. ACOs wouldn't do away with fee for service but would create savings incentives by offering
bonuses when providers keep costs down and meet specific quality benchmarks, focusing on
prevention and carefully managing patients with chronic diseases. In other words, providers
would get paid more for keeping their patients healthy and out of the hospital.
If an ACO is not able to save money, it would be stuck with the costs of investments made to
improve care, such as adding new nurse care managers, but would still get to keep the standard
Medicare fees. The law also gives regulators the ability to devise other payment methods, which
would likely ask ACOs to bear more risk. For example, an ACO could be paid a flat fee for each
patient it cares for.
How would an ACO be different for patients?
Primary care doctors who are part of an ACO would be required to tell their patients. But
although physicians will likely want to refer patients to hospitals and specialists within the ACO
network, patients would still be free to see doctors of their choice outside the network without
paying more. ACOs also will be under pressure to provide high quality care because if they don't
meet standards, they won't get to share in any savings and could lose their contracts.
Who's in charge hospitals, doctors or insurers?

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Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Accountable care organizations take up only seven pages of the massive new health law yet have become one of the most talked about provisions. This latest model for delivering services offers doctors and hospitals financial incentives to provide good quality care to Medicare beneficiaries while keeping down costs. A cottage industry of consultants has sprung up to help even ordinary hospitals become the first ACOs on the block. Yet the concept has been short on details. ACOs have been compared to the elusive unicorn: everyone seems to know what it looks like, but no one has actually seen one. But the health care industry has already embarked on a frenzied quest to create them as quickly as possible. Today, after many delays and false starts, the Obama administration proposed guidelines on how ACOs will work. Here is a brief guide to what we know about ACOs. What is an accountable care organization ...
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