Accountable Care Organizations

By Ellen Ferringer, CPA, CAPPM, Katz, Sapper & Miller, IHCA Associate Member
The face of healthcare is changing. "Accountable care organization" is becoming a common term in the industry. What exactly is an accountable care organization? On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act, which empowers the Secretary of Health and Human Services to create a shared savings program to promote accountability of patient care through Accountable Care Organizations (ACO). As defined by the Centers for Medicare and Medicaid Services (CMS), an ACO is an "organization of healthcare providers that agrees to be accountable for quality, cost and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.” Ultimately, Medicare is trying to create an incentive program to reduce its costs while increasing the quality of care provided to patients.

The regulations regarding ACOs are still in proposed form and 427 pages in length. At a very high level, these proposed regulations provide the following requirements of ACOs:

• Provide care for at least 5,000 Medicare beneficiaries (based on their primary care physician)

• Participate in the program for three years, beginning Jan. 1, 2012

• Self-report 65 quality measures to the CMS

• Meet various anti-trust regulations

Under the proposed rule, Medicare would continue to pay healthcare providers for specific services under the Medicare payment systems. The ACO would then receive a share of the cost savings based on their Medicare patient population spending compared to benchmarks determined by CMS. The concept is that by better coordinating patient care between the primary care physicians and the specialists, there will be more information sharing and quality of service will increase, thus reducing costs.

Currently, many physician groups and hospitals are weighing the pros and cons of forming an ACO. Included in this mix are also long-term care facilities. Since they play an important role in keeping hospital readmissions down, long-term care facilities appear to be a perfect partner to hospitals and physicians. CMS estimates there will be 75 to 150 ACOs formed by Jan. 1, 2012. Even with this relatively small number, a huge change in patient care is expected as a result of this Act.

Ellen Ferringer is a director in Katz, Sapper & Miller’s Healthcare Resources Group. For more information, contact Ellen at 317.580.2013 or eferringer@ksmcpa.com.