Accountable Care Organizations explained

An estimated 14 percent of the U.S. population is now being served by an ACO

Analysis

One of the main ways the Affordable Care Act seeks to reduce healthcare costs is by encouraging doctors, hospitals and other health care providers to form networks to coordinate care better, which could keep costs down.

To do that, the law is trying a carrot-and-stick approach in the Medicare program: Accountable Care Organizations. ACOs have become one of the most talked about new ideas in Obamacare. Providers get get paid more if they keep their patients well. About four million Medicare beneficiaries are now in an ACO, and, combined with the private sector, more than 428 hospitals have already signed up. An estimated 14 percent of the U.S. population is now being served by an ACO. A patient may even be in one and not know it.

While ACOs are touted as a way to help fix an inefficient payment system that rewards more, not better, care, some economists warn they could lead to greater consolidation in the healthcare industry, which could allow some providers to charge more, if they’re the only game in town.

[See also: ACO rules need to level competition.]

Because ACOs are increasingly important, here are some answers to common questions about them:

What is an accountable care organization?

An ACO is a network of doctors and hospitals shares responsibility for providing coordinated care to patients in hopes of limiting unnecessary spending. At the heart of each patient’s care is a primary care physician.

In Obamacare, each ACO has to manage the healthcare 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 with most health systems today, Miller says, is that patients are getting each part of their healthcare 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."

Why did Congress include ACOs in the law?

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