Academic journal article Journal of Healthcare Management

Accountable Care Organizations: Principles and Implications for Hospital Administrators

Academic journal article Journal of Healthcare Management

Accountable Care Organizations: Principles and Implications for Hospital Administrators

Article excerpt


With the passage of the Affordable Care Act (ACA) in 2010, broad agreement has been reached on the need for fundamental reform of healthcare delivery and payment systems. Accountable care organizations (ACOs) have become one of the most discussed provisions of the ACA, and Medicare's Shared Savings Program (SSP), the incentive program tied to ACOs, has the potential to change the delivery of healthcare. The SSP will attempt to improve the quality of care while reducing the growth in expenditures by encouraging the formation of ACOs.

The SSP is voluntary, and organizations that wish to participate will encounter advantages and disadvantages in its adoption. This article provides hospital administrators with basic information about the ACO requirements set forth by the Centers for Medicare & Medicaid Services and helps frame decision making about hospital participation in ACOs.


Accountable care organizations (ACOs) were proposed in the Affordable Care Art (ACA), signed into law in 2010, as a measure to slow rising healthcare costs and improve quality in the traditional Medicare program. ACOs have been defined and interpreted differently by various thought leaders in the field. Elliot Fisher, MD, director of the Dartmouth Center for Healtfi Policy Research, defines an ACO as "a local network of providers that can manage the full continuum of care for all patients within their provider network" (Ronning 2010, 47). The ACA introduces the ACO concept through the creation of the Shared Savings Program (SSP) for Medicare reimbursement.

The ACA highlights the following criteria that ACOs must demonstrate to qualify for participation in Medicare's SSP (Ronning 2010):

* Accountability for quality, cost, and care of a population of Medicare beneficiaries

* Participation for no less than three years

* Affiliation with a legal structure that can receive and distribute bundled shared savings payments

* Inclusion of primary care physicians; demonstration that enough primary care physicians are included whose combined Medicare population is at least 5,000

* Presence of a clinical and administrative management system

* Promotion of evidence-based medicine

* Reporting of quality and cost measures

* Coordination of care, including die use of technological systems

* Demonstration of patient-centeredness

Accountable care is not a new concept. The idea of assigning accountability to health organizations for their quality has been discussed for many years. For example, accountability was addressed in the attempted health reform of the 1990s, when the accountable party was the insurer or the health maintenance organization (HMO). By making facilities and providers dirertly responsible for accountability under the ACA, a higher quality of care is envisioned. The most notable difference between today's measures of accountability and those in the managed care era is today's incorporation of cost components. ACOs may be an effective way to begin reforming the US healthcare system because they avoid the question of where to begin, by addressing both provider payment and delivery system reform.

Many providers believe the incentives to participate in ACOs and Medicare's SSP are too difficult to attain and too operationally burdensome to seek. In a survey of its members, the American Medical Association reported that 93 percent would not participate in an ACO (Wall Street Journal 2011). Changes were made to the proposed rule to accommodate providers' concerns; however, serious reservations remain. This article explains basic aspects of ACOs and Medicare's SSP and discusses challenges for organizations attempting to create and profit from an ACO. Factors that hospital administrators should consider as they evaluate ACO participation are also addressed.


The Centers for Medicare & Medicaid Services (CMS) is in the process of implementing the SSP, which is an incentive program to promote the formation and use of ACOs. …

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