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What is an Accountable Care Organization?

By Brendon O'Neil

Basically, an Accountable Care Organization (ACO) is a system of care and payment meant to tie quality healthcare with level of payment reimbursement for providers.

For instance, a group of providers form a partnership together to serve a particular patient population. The third-party payers that reimburse them for patient care, such as insurance companies, Medicare payments, etc, does so in regards to performance metrics.

In the more traditional type of fee for service (FFS) system, doctors got reimbursed simply based on the amount and type of services they provided the patient. In that system, doctors were rewarded for administering more care, whether it was necessary or helpful for getting the best patient outcomes.

Through ACO's, physicians themselves can negotiate their salary through four models. The first, productivity-based compensation, pays the physician based on a percentage of what they bill or invoice for services. Incentive-based compensation figures a portion of income based on measurables tied to performance.  Capitulation starts with a pre-negotiated percentage of revenue from public and private payers. The last form of physician salary through ACO's is much like the rest of America, where your income is negotiated at time of hiring, and include bonuses and other incentives.

What is the Purpose of an Accountable Care Organization?

The whole concept of 'shared savings' with ACO's derives from the idea that groups of physicians who have related practices can work together to give better care in a more cost-effective way. In fact, ACOs are a big part of the cost-savings plan in the Affordable Care Act (ACA).

The ACA encourages physicians who take part in the Medicare program to form groups to deliver better patient care. Health care providers have a financial incentive to keep people healthier. For ACO's to participate in this plan, they must provide services to at least 5,000 Medicare patients for a minimum of three years to qualify.

Because of this new way of thinking and forming quality over quantity type plans, the Department of Health and Human Services has plans of tying at least 50% of all Medical payments to quality of care over the next two years.

How Do ACOs Get Paid?

While ACOs still technically do get paid fees for the services they provide, there is a bonus structure for times when providers keep overall cost of care down. There may also be penalties when providers fail to meet quality of care benchmarks.

The nice thing about ACOs for patients is that they still have options outside the network for care. If a doctor is part of an ACO, they must let the patient know. They will typically refer patients to other doctors in their network, but patients can still see whoever they are comfortable seeing for care. And for privacy, patients can request their health information not be shared with the other doctors in the network.

ACOs have been attractive to several types of businesses within the healthcare industry, in addition to just individual or private practices. Large hospitals have been known to purchase smaller facilities in hopes of forming an ACO where they employ and pay all the doctors directly.

Even health insurance companies have formed their own ACOs. A number of economists fear this surge in ACOs could lead to monopolization of care by a small number of healthcare companies. But many agree, ACOs are just another form of care in an ever-changing field of medicine.

To learn more about ACOs and other quality based reimbursement models within healthcare, expand your education. You can find a variety of degrees listed on our site, from management and leadership to disease prevention and emergency planning. Only through education can we begin to create the healthcare systems that truly keep people happy and healthy.

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