A Medical Neighborhood: Accountable Care Organizations Could Solve Some of Health Care's Biggest Problems, but They're Largely Untested

By Foreman, Megan | State Legislatures, May 2012 | Go to article overview

A Medical Neighborhood: Accountable Care Organizations Could Solve Some of Health Care's Biggest Problems, but They're Largely Untested


Foreman, Megan, State Legislatures


Improving how we care for patients while controlling escalating costs are the two toughest issues in health care.

An approach some think may address both is the use of accountable care organizations, in which a range of medical providers work together to manage a patient's medical needs. Some backers think the approach could help states control Medicaid costs and provide better care.

Accountable care organizations are similar to medical homes, but on a larger scale--a medical neighborhood. In an ACO, all providers--from the primary care doctor to the specialist to the hospital--have a stake in improving the health of patients.

The goal of coordinating care is to ensure patients get the right care at the right time in the right setting. This may mean more convenience for patients: Extended office hours, same-day appointments, and a 24/7 call-line staffed with professionals who can give patients advice and triage health concerns. States save money when the majority of patient care happens in a primary care setting. For example, Colorado estimates it spends $50 million a year on emergency room care for nonemergency situations. A 2009 survey indicated 87 percent of Medicaid clients who used ER services were never seen for that condition in a primary care setting.

Colorado, a leader in developing the model, is setting up regional ACOs to serve the state's Medicaid beneficiaries. The state is currently testing its new system--called Regional Care Collaborative Organizations--with 60,000 Medicaid clients in a small number of counties. The program is set to expand to include all Medicaid beneficiaries in July if the test group meets its budget and patient care goals. Colorado hopes to save up to $14 million a year once the program is fully implemented.

"Community health centers and medical homes are critical to coordinating care," says Colorado Senator Betty Boyd (D), chair of the Health and Human Services Committee. "If you have a medical home, you're more apt to get the most appropriate care because the provider knows what's going on in your health life, and you are less likely to overuse the system."

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Pilot programs are just beginning to test the

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ACO model and the data on their effectiveness is still to come. For this reason, some lawmakers think the timing is wrong to experiment with new approaches, especially with looming deadlines for federal health reform. Some are concerned that ACOs inevitably will lead to even larger health care organizations.

Potential Cost-Savings

For most patients, their benefits package will stay the same under ACOs. The consumer will find that little about their health care experience changes, except maybe some added conveniences. The major differences will be on the provider side, as payment models change drastically. The accountable care model fundamentally changes the financial incentives for health care providers.

The prevalent fee-for-service model rewards volume. Primary care doctors, specialists and other providers are not paid to prevent problems or help patients maintain a certain level of wellness. ACOs turn the compensation model on its head by creating an incentive for treating illnesses and diseases early, providing more primary care, managing chronic diseases well, avoiding redundant and expensive tests, and cutting down on hospital readmissions.

The organizations do this by having providers and payers agree on a single budget for all the health services a certain group of people use in a year. They also establish a series of goals, such as reducing the number of hospital-acquired infections and increasing the number of patients able to manage their own illnesses. The budget and goals are determined through an analysis of claims to ensure the risk is tolerable for the providers and the quality goals are achievable. …

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