How the accountable care organization will impact health IT strategy

Health care reform emphasizes the ACO payment and care delivery model. This tutorial covers the objectives of the accountable care organization, as well as its IT requirements

ACO, short for accountable care organization, is a small acronym making a large splash in the health care industry. With the prospect of better, more coordinated care for patients and reduced costs, the ACO model -- a main component of President Barack Obama's health care reform -- is gaining much traction given the nation's $2.5 trillion investment in health care. This tutorial looks at some of the key fundamentals of the accountable care organization, such as how it could operate, how it aims to lower costs and what IT infrastructure supports it.

What are accountable care organizations?

An ACO is an association among hospitals, providers and insurers in which all parties assume accountability for the quality of care for patients, and how money is spent as it pertains to a population. The ACO payment and care delivery model aligns physician reimbursements with quality metrics in an effort to reduce health care costs.

Essentially, the pay for physicians and hospitals is contingent on their ability to meet quality of care indicators. If caregivers are unable to keep costs down and are not improving the health of patients, they receive lower payments from Medicare.

From a patient perspective, the ACO model would influence how they are treated throughout the care process. All appointments and tests would be completed under the same health care umbrella. The idea is that if a primary care physician is treating a patient, and additional insight is needed from a specialist, the physician would then refer the patient to that specialist within the ACO. A patient seeking additional care outside the umbrella would likely cost more.

While it's generally accepted that some patients will dislike the model given some limitations to care, other patients are likely to find comfort in being guided through the treatment process.

Payment in the ACO is not limited to one method. Capitation, which focuses on physicians being contracted via a health maintenance organization, or HMO, is a common form of payment. Fee-for-service, or FFS, occurs when physicians receive an incentive retrospectively for an office visit, test, procedure or other medical services.

What is the history of the ACO model?

The ACO model's pay-for-performance system tied to care quality indicators has its roots in former President Bill Clinton's health care reform efforts. Pay-for-performance rewards physicians, hospitals, medical groups and other caregivers for meeting particular, pre-established performance measures in an effort to promote care efficiency.

The managed care model of the 1990s -- operated through networks driven by primary care physicians focused on providing continuity of care and restricting unnecessary tests -- is in some ways similar to the ACO model, where primary care physicians treat patients and, if needed, refer them to specialists within the network. However, low physician participation in managed care, which stemmed from a wish to remain independent of such strict health plans, left many patients unsatisfied with their managed care options.

The accountable care organization also draws comparisons to the HMO, which began in 1970. Both services claim cost-saving initiatives via public programs such as Medicare and also promote accountability from providers to a defined population. However, in the HMO model, patients cannot receive treatment out of the network.

What are the expected benefits of the ACO model?

Saving money is the key factor in accountable care organization success. When caregivers collaborate to ensure that patient care is delivered when it is needed -- or in a preventive manner that keeps minor conditions from escalating -- financial savings are likely to come, as patients can avoid unnecessary procedures and hospital visits.

Better care coordination includes increased communication with, and involvement of, patients. This, experts believe, brings health care benefits to the surface, as it lets patients play a more active role in their own health care. It also removes some of the treatment burden from providers, who generally assume all care responsibility. (It should be noted that some patients may need their own incentives to become more accountable for their medical decisions and more engaged in the care process.)

How do health care providers form an ACO?

Forming an accountable care organization takes teamwork -- providers working with other providers, providers working with hospitals, providers working with insurers and primary care providers working with specialists. It's not just peer-to-peer collaboration among health professionals, either -- dealing with data systems, resource allocation and clinical management is part of forming an accountable care organization.

A Health CareRx report from consulting firm Grant Thornton LLP noted four key considerations for ACO formation:

  • Examining provider alignment, which determines a provider's ability to serve the ACO's designated patient population.
  • Reviewing current processes and assessing their efficiency, which can be improved by streamlining operations, reducing expenses and cutting hospital admissions.
  • Performing fewer expensive procedures -- namely, CT scans, PET scans and MRIs.
  • Aligning an entity's incentives with high-quality delivery of care, which emphasizes quality of care over volume of care.

From provider collaboration to IT initiatives, these components have to fit the Medicare Shared Savings Program, which sets standards for the foundation of ACOs.

The Centers for Medicare and Medicaid Services (CMS) released the long-awaited ACO final rule in October. The ACO final rule differs from the ACO proposed rule in several ways, with most of the changes stemming from outcry that provisions such as strict IT requirements, stringent deadlines and a complex application process would severely restrict the feasibility of creating an accountable care organization.

One of the chief changes surrounds electronic health record (EHR) use. The ACO propose rule said that half of primary care physicians must be defined as meaningful users by the start of their second performance year. Under the final rule, however, EHR use is not a requirement for ACO participation. Implementing an EHR system does plays a large role in quality reporting, though. In fact, using a certified EHR system is a quality measure that will be "weighted higher than any other measure," according to the ACO final rule.

What are the IT challenges to making the ACO model work?

The proper ACO technology infrastructure requires several components. An interoperable EHR system is one of them. A primary care physician will often refer a patient to a specialist; the specialist's EHR system must be able to receive the patient's information quickly and accurately. If it cannot, it could result in duplicate care, which would adversely affect ACO quality metrics, as well as unnecessary procedures, which would likely raise costs and, as a result, violate the bedrock principle of an ACO.

Health information exchange (HIE) technology is also paramount. Accountable care organizations will require integrated systems for exchanging patient data that will cover all the bases -- performance metrics on care cost, discharge time and overall patient status, ER visits, admissions, tests, infection rates and other critical metrics. (While these are just examples, it's ultimately up to the ACO to distinguish which information needs to be exchanged for better care coordination.)

These particulars will need to harmonize with all EHR systems within the accountable care organization for successful interoperability. If not, system upgrades will need to be done.

What's cumbersome, however, is that the EHR and HIE technology necessary to accommodate the ACO model won't be defined until stage 3 of meaningful use. Those requirements, which have not yet been outlined by policymakers, could hamper how and what information is sent via EHR systems. Furthermore, some of that HIE and EHR functionality may be even more advanced than what is eventually spelled out in the meaningful use requirements, which places an additional IT burden on ACO members. 

Let us know what you think about the tutorial; email Craig Byer, Assistant Editor.

Dig Deeper on Federal health care policy issues and health care reform