Accountable care organizations: What they are and what they mean to you

May 1, 2011

As physicians, hospitals, insurance companies, and other organizations grapple with this new entity, it appears there are more questions than answers.

Key Points

"Under such program," the law continues, "groups of providers of services and suppliers meeting criteria specified by the Secretary may work together to manage and coordinate care for Medicare beneficiaries through an ACO, and ACOs that meet quality performance standards established by the Secretary are eligible to receive payments for shared savings."

The goal of an effective health care system is to provide coordinated care between primary care physicians, specialists, and hospitals to manage the overall care of our patients. At the moment, we still live in a fee-for-service world; the more we do, the more we can charge payers for. Critics of the fee-for-service system contend that it motivates doctors to order more tests, do more procedures, and prescribe more medications, thus raising the cost of health care, which now represents 17% of the GDP, or $2.3 trillion-more than any other developed country in the world.

In the 1980s, there was an attempt to control costs by creating a capitated payment scheme. This consisted of a fixed monthly payment for each enrollee, or per-patient-per month. The intent of the capitated payment scheme was to control costs by mandating which doctors could be seen and by setting a "cap" on the number of office visits, procedures, and tests a patient could have each month. What happened? The consumers, or our patients, resisted network arrangements that restricted their choice of providers and decreased services, which was interpreted as denying care to our patients.

So what makes an ACO different than capitated care? The ACO has emerged as a way of promoting integration of care between hospitals and doctors and hopefully avoiding the pitfalls and obstacles associated with older, failed programs. The concept is that hospitals and their affiliated physicians, even if they are not employed physicians, might work together in an organized and coordinated fashion to reduce costs and improve the quality of care. The payers could hold these groups of doctors and hospitals accountable if they control costs and provide quality care. Groups that were able to accomplish these goals would be financially rewarded, and they would thus be motivated to improve care and further rein in costs.

What makes an ACO?

A typical ACO would be a health care cooperative involving a group of physicians, allied health care professionals, and one or more hospitals that all work together to deliver appropriate care in the appropriate setting at the appropriate time in a person's illness or injury. Treatments would rely on evidence-based protocols and cost-effective preventive measures wherever possible. The ACO would rely on a state-of-the-art electronic medical record program.

In the immediate future, there will be aggregates of physicians, such as large, multispecialty groups, independent practice associations consisting of solo practitioners, and small group practices joining together to share resources and improve their negotiating power. Unfortunately, ACOs are relatively new and untested. At the moment, they are in a state of evolution. The model passed by the Senate is now part of Medicare and will embody the following basic features:

On March 31, 2011, the Department of Health and Human Services released new proposed rules on ACOs. According to the rules, in order for providers to share in savings, ACOs must meet quality standards in five key areas: patient/caregiver care experiences, care coordination, patient safety, preventive health, and at-risk population/frail elderly health. ACOs that do not meet the quality standards will not share in program savings and will eventually be held accountable. To view the proposed rules, visit

The most cited examples of this concept are Cleveland Clinic, Kaiser Permanente, and Mayo Clinic. These three systems own their hospitals and employ their physicians. As a result, there is coordination of care, and doctors and hospitals easily and transparently exchange patient information and make every effort to follow patient guidelines and best practice protocols. These systems report improved clinical care, decreased hospital re-admissions after surgery, and a decrease in readmission to the hospital with diagnoses of congestive heart failure, chronic obstructive pulmonary disease, diabetes, and pneumonia.

Also, these programs report some of the highest patient satisfaction rates compared to independent groups of physicians and hospitals. These models have demonstrated that they are able to control costs and provide care at a lower cost than the traditional fee-for-service method that is currently in place throughout the nation. It will be tough to argue with the success of these medical care programs.

What's in it for urologists?

How will ACOs affect our specialty? In the United States, most physicians are specialists, and there's a smaller pool of primary care doctors. Most of the specialists are in a fee-for-service compensation formula, and as a result we spend most of our time generating income. With ACOs, we will have to re-orient our thinking. We will have to focus on quality improvement and improving the health of the population we serve.

As urologists, we will have to create guidelines for managing large populations of patients. Examples include when to start and stop PSA testing, managing populations of prostate cancer patients, incontinence evaluations and treatment, or scheduling of intravesical therapy for noninvasive bladder cancer.

There are several advantages to ACOs. First, urologists wouldn't be making money by focusing on patient volume. As a result, we would be off the treadmill of seeing how many office visits we can handle each day and how many procedures we perform on our patients. Second, since we would be focusing on caring for populations of patients, we would feel a greater sense of accomplishment and realize that we didn't leave at the end of the day knowing that there was so much more that could have been done for our patients. Third, instead of trying to do everything ourselves, in a well-organized ACO, urologists would actually be able to spend their day doing things that really would be high-value for patients. Of course, this would include help from the rest of the staff and use of guidelines to improve quality for the entire population of patients of the ACO-not just the few who happen to come into the office.

It will require a major cultural shift in the way physicians think about what constitutes a good physician and what constitutes quality. Quality isn't just what you do for an individual patient while you're eyeball to eyeball with them. The new mantra will be, "Quality is what my organization does for our population of patients all the time."

Bottom line: The take-home message is simple. We need to shift our mindset from doing more (the fee-for-service mentality) to focus on quality and efficiency by providing the best care in the appropriate setting, with an emphasis on reducing the cost of care.

Dr. Baum is a urologist in private practice in New Orleans. He is the author of Marketing Your Clinical Practice-Ethically, Effectively, and Economically.

Dr. Dowling is medical director of Urology Associates of North Texas, a 49-physician, community- based, single-specialty group in the Dallas-Fort Worth metroplex.