Accountable Care Organizations Step Up to Medicare's Challenge

Accountable care organizations (ACOs) are starting to show their muscle. The Centers for Medicare and Medicaid Services (CMS) just started contracting with 89 ACOs that cover nearly 1.2 million Medicare beneficiaries in 40 states and Washington, D.C. Including the 59 ACOs that joined the Medicare Shared Savings Program (MSSP) earlier, that's a total of 154 ACOs caring for about 2.4 million Medicare patients, according to CMS.

Referring to the latest CMS announcement, Andrew Croshaw, managing director of the healthcare practice of Leavitt Partners in Salt Lake City, told InformationWeek Healthcare, "To me, it's another data point that indicates that providers are embracing this movement. It shows there's energy in this movement and that it comes from providers."

The MSSP allows ACOs to keep a portion of any money they save for Medicare if they meet specified quality goals. Many ACOs also have arrangements with private payers.

ACOs are expected to boost the health IT sector significantly because of their need for an extensive IT infrastructure. To be successful, these organizations must coordinate care, track patient health status, remind patients when they need preventive or chronic care, and generate analytic reports, among other things. They must also submit data on 33 quality measures to be eligible for Medicare bonuses.

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Although CMS' final ACO rule does not require the use of electronic health records, organizations would find it hard to function and produce savings without EHRs. In fact, former CMS chief Donald Berwick said that health IT was a "core function" of ACOs. Moreover, in the 32 Pioneer ACOs--more advanced entities that take partial financial risk from CMS--half of the primary care physicians must show Meaningful Use of certified EHRs.

Observers were surprised--and the American Medical Association was elated--when the first batch of ACOs to contract with Medicare included many physician-led organizations. The second batch continues that trend. While some of the ACOs are partnerships between physician groups or networks and hospitals, few are limited to a hospital and its employed doctors.

The contracted ACOs come in all sizes. The Owensboro ACO in Owensboro, KY, includes only 26 physicians in small practices; in contrast, Iowa Health Accountable Care, based in Des Moines, includes 1,551 physicians, among them doctors employed by hospitals and community clinics.

Leavitt Partners' latest ACO study shows that 221 accountable care organizations existed in 45 states as of May. Of these, 118 were primarily sponsored by hospital systems, 70 by physician organizations, 29 by insurance companies, and four by community-based organizations. The largest numbers of ACOs were found in California (11) and Massachusetts (5).

Single provider and its members or affiliates comprise the predominant type of ACO. There were 148 single-provider ACOs, compared with 43 multiple-provider ACOs that included more than one business entity, such as a hospital and a physician organization. This has implications for health IT, because single providers are likely to have an enterprise-wide EHR and, at least for now, may have less need for a community health information exchange than multiple-provider ACOs do.

Croshaw said that physician-led ACOs may not need to create as extensive an IT infrastructure as hospital-sponsored ACOs would. The main reason, he said, is that health plans are forming relationships with many physician groups. Even if the insurer doesn't sponsor the ACO, it often provides many of its IT assets.

"Health plans are subsidizing the cost of IT and they're providing help with care coordination. Some of them are taking a simplified approach with provider organizations, so providers don't need the large-scale capital investment in ACOs that was discussed only a year ago."

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