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Accountable Care Organizations

What are they? Where do you fit?


Updated September 18, 2013

The Patient Protection and Affordable Care Act of 2010 calls for the creation of a national voluntary program for accountable care organizations (ACOs) by January 2012.

So what is an ACO? Essentially it is a group of providers responsible for the care of a specific population of patients. The key here is that what have been silo organizations in the delivery of care and the acceptance of payment will now be one entity. This could include hospitals, home health agencies, nursing homes, and others. The government’s definition is "a group of health care providers who give coordinated care, chronic disease management, and thereby improve the quality of care patients get. The organization's payment is tied to achieving health care quality goals and outcomes that result in cost savings."

Accountable care organizations will be largely based on physician practices that, in turn, may be organized as patient-centered medical homes. There are models out there already including Integrated Delivery Systems, Multispecialty Group Practices, Physician-Hospital Organizations, Independent Practice Associations and Virtual Physician Organizations.

Accountable Care

The phrase is attributed to Dr. Elliot Fisher of Dartmouth Medical School. He has led the Dartmouth Atlas Project that has documented the variation in care – both cost and quality - across the United States.

Not surprisingly, the Dartmouth initiative has shown that there are wide variations in care and that the more money spent does not necessarily lead to better outcomes. That further led Dr. Fisher to a possible solution to care uniformity, coining the phrase the Accountable Care Organization, known as an “ACO.”

A Virtual Approach

Dr. Fisher suggests that “virtual” organizations consisting of the various physicians that are associated with local acute care hospitals, an “extended hospital medical staff,” are at the core of the model. He contends that improving quality and lowering cost will happen if there is greater accountability on the part of this “extended medical staff.”

Kelly Devers and Robert Berenson wrote in an Urban Institute paper that there are three essential characteristics of ACOs:

  1. The ability to provide and manage patients across the continuum of care, including at least ambulatory and inpatient hospital care and possibly post acute care.
  2. The capability of planning budgets and resource needs together.
  3. Sufficient size to support comprehensive, valid, and reliable performance measurement.

ACO members will theoretically share in the savings that results from their cooperation and coordination and in the process curb overutilization and overbuilding of health care facilities and technology.

Much to be Done

The problem is that much of the ACO model has not been defined and certainly in the aging services it has been scarcely thought about. Here are some of the issues and much remains to be done.


  • What will be the regulatory definition?
  • What specific types of health professionals can form an ACO?
  • What will be the minimum size requirement?
  • What governance requirements will be established?

Antitrust Law

  • How will federal antitrust enforcers view the establishment of ACOs?
  • Will the federal government create an express safe-harbor from antitrust scrutiny for ACO activities under certain conditions?

Interaction with States

  • Will ACO provisions preempt state regulation or allow states to develop regulatory standards?
  • Will state insurance commissioners insert themselves and demand that ACOs should be regulated under state law?

And that is just the tip of the iceberg. Payment methodologies, beneficiary safeguards, performance measurement, selection of pilots – all of these have to be addressed.

As you review the above you may be wondering what this might have to do with providers in the aging services. Actually everything. Because physicians, typically the gatekeepers of care, will become the coordinators of care and that care WILL include organizations such as hospice, home care, etc. So even if your financial model is out of pocket payment, it could be that a physician will deem your type of care appropriate for his/her patients and choose to take some of the bundled payment they receive and invest it in your care model.

It will be important moving forward that you keep abreast of developments in the ACO field.

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