Accountable care organizations seek to cut health care spending

Justin Stoltzfus

A little-known provision in the federal health care reform law might be able to save Medicare some money and control the federal budget.

The idea? Accountable care organizations (ACOs). These proposed programs, scheduled for rollout in 2012, will give health care providers new incentives to be efficient in treating the nation's growing Medicare community.

The Centers for Medicare and Medicaid Services (CMS) already has set up rules for what these new provider groups would look like, and the U.S. Department of Health and Human Services (HHS) will help develop them.

An ACO is a network of health care providers and facilities. All members of that network share responsibility for keeping a patient healthy. Hospitals could join together to form an ACO, as could groups of doctors. Or insurance companies can establish their own ACOs. All players involved would coordinate each patient's treatment, such as preventive care, hospital care and home care, according to Kaiser Health News.

ACOs also will change the way that doctors get reimbursed for the care they provide to Medicare beneficiaries. In the existing fee-for-service system, health insurance companies reimburse doctors for each procedure or test they administer, creating an incentive to give as many tests as possible, whether they're necessary or not.

With ACOs, the fee-for-service system won't go away entirely, but there will be some financial incentives to save, in the form of bonuses for providers that rein in costs and keep patients out of the hospital. If an ACO doesn't meet certain quality and cost-saving benchmarks, however, there will be no bonuses -- and the ACO still will have to bear the costs of technology and staffing upgrades it made to become an ACO. In addition, ACOs who fail to achieve their goals risk losing their Medicare contracts, according to Kaiser Health News.

With some hefty rewards in the balance, physicians and insurance companies alike are looking into the requirements for ACO eligibility. CMS has created a list of possible forms that ACOs could take, including:

  • Physicians in existing family care groups.
  • Physicians in health care networks.
  • Doctor groups within care facilities.
  • Hospitals and other medical facilities.

Some ground rules already have been established by CMS: All ACOs will have to have at least 5,000 beneficiaries on their rolls for at least three years.

ACOs may sound similar to health maintenance organizations (HMOs). But an ACO doesn't have to be a sole health care provider for a patient, and Medicare patients do not have to remain within an ACO's network when choosing doctors.