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Four steps to a successful ACO

A report outlines issues, such as potential savings, that should be analyzed before a health care institution moves forward with an accountable care organization.

By — Posted March 1, 2012

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Medical practices, hospitals and other players in the health system have four issues to consider before deciding whether an accountable care organization will work for them, according to a Feb. 21 report by Thomson Reuters.

"Those of us with long memories recall the promise of health maintenance organizations in the '80s and '90s, and we recognize that a health care concept is ultimately only as good as its implementation," said Bob Kelley, senior vice president of health care analytics at Thomson Reuters.

The report said the four keys to developing a successful ACO are: analyzing the number of potential patients; in- and out-of-network care used by those patients; the cost of establishing an ACO; and the potential savings opportunities (link).

Thomson Reuters is advising several institutions on this issue. The Patient Protection and Affordable Care Act stipulates that ACOs will be established for Medicare and Medicaid beneficiaries in 2012. Many private insurers have their own programs that attempt to coordinate care, reduce costs and then distribute savings to physicians and other participants.

The number of potential attributed patients and the in- and out-of-network utilization of patients are considered important in projecting how and where patients will access care. In addition, having large numbers of patients is viewed as increasing the chance of reducing health care costs.

"There's no magic number, but there has to be a reasonable economy of scale to warrant doing it," said George Roman, senior director of health policy for the American Medical Group Assn. "If you have 300 attributed patients, that is likely too small a number. And you have got to know who your people are. You cannot operate blindly."

The Medicare shared savings program requires a minimum of 5,000 patients.

The cost of establishing an ACO and any savings opportunities are viewed as important, because it may not be possible to reduce some sources of high health care costs. HMOs were widely criticized as providing financial incentives for withholding care. ACO regulations generally try to avoid that possibility and perception. For example, a practice may not be able to save money on cancer patients in need of expensive therapies, but it may be able to do so by developing ways to reduce the number of patients with a medical condition that requires frequent emergency department care.

"It's not just, do you have patients who have a lot of spending associated with them? Do these patients have conditions that you can influence in some way?" said Harold Miller, executive director of the Center for Healthcare Quality & Payment Reform in Pittsburgh. "There may be no alternative with some patients. For some, there may be a better way to manage their health care."

The American Medical Association's ACO principles state that these entities should be led by physicians and increase access to care, improve clinical quality and ensure efficient delivery.

Experts caution that crunching the numbers is no guarantee of success. Other metrics may need to be calculated. Several participants in recent Medicare demonstration projects did not hit the intended targets.

"These folks didn't make the minimum savings threshold of 2%," Roman said. "If these very large systems couldn't do it, this doesn't bode well for an ACO to achieve nearly twice that, as would be the case for the smallest federal ACO with only 5,000 patients. But we do believe this kind of system will lead to paying for value rather than paying for volume and a less fragmented care delivery system."

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