What You Need To Know About Accountable Care Organizations

Medscape article by Leigh Page

Accountable care organizations (ACOs) can seem complex and unfamiliar to physicians—even those who are participating in one of them. There are risk-taking and shared-savings arrangements, both of which depend on a hospital- or physician-led organization meeting goals tied to quality measures, but each model uses different formulas to allow physicians to share in any potential savings.

Because the ACO concept is fairly recent, doctors may feel confused and anxious about how they’ll maintain and grow their income, especially in an environment where they already feel as if they’re a big cost-cutting target.

Here, five medical directors, serving at a variety of Medicare ACOs, present 10 straightforward—and often eye-opening—points they think doctors need to know about this emerging care-delivery model.

1. Concerns About Losing Money Currently Affect Only a Minority of Physicians

Many doctors are concerned about losing money and are skeptical about making money in ACOs, but the medical directors we spoke with think these concerns have been exaggerated.

At the Medicare ACO run by BJC HealthCare, a large health system in St Louis that includes both independent and employed doctors, “physicians have zero financial risks,” according to the ACO’s medical director, Douglas Pogue, MD.

That said, if an ACO in the Medicare shared-savings program (MSSP) doesn’t produce any shared savings, there’s the possibility that doctors in some arrangements could be forced to pay a sizable penalty—potentially several millions of dollars. However, this scenario only applies to a handful of MSSP ACOs that accepted “downside risk” in meeting savings targets. These ACOs agreed to this arrangement because it made them eligible for higher bonus payments if they did save money. But the majority of MSSP ACOs, including the BJC HealthCare ACO, didn’t accept downside risk, and doctors in these organizations have absolutely no risk of paying penalties at this time.

This is likely to continue for another 3.5 years. Under the current version of Medicare ACO regulations, all MSSP ACOs would be required to accept downside risk in January. However, the Centers for Medicare & Medicaid Services (CMS) is proposing[1] to extend the deadline for required downside risk to 2019, and the agency is expected to adopt this change in final rules due out this summer.

Many ACOs, including BJC HealthCare, hope to be making bonuses as they learn the ropes in the next few years. Dr Pogue says his ACO is producing $3 million a year in savings—still shy of its target of $4.5 million to qualify for a bonus payment—but he’s confident that his fledgling organization will reach the target in time.

For Some Doctors, Bonuses Are a Reality

Already, at physician-run Palm Beach ACO in Florida, doctors are making a significant amount of money in bonuses. In CMS’s first distribution of MSSP bonuses last year, Palm Beach received nearly $11 million by saving Medicare $22 million in projected costs.[2]

Each ACO can distribute the bonus as it sees fit. At Palm Beach, each physician received an average of $63,000. Lenny Sukienik, DO, one of Palm Beach’s medical directors, says this included a baseline amount, plus payments based on the amount of money each physician saved and the number of Medicare patients each one treated.

Still, Palm Beach is a rare bird. Only about one half of ACOs reduced Medicare spending in the first measured period, and just one quarter actually produced enough savings to earn a bonus. But it shows that it can be done without a decline in quality, on the basis of 33 different measures against which each ACO has to demonstrate competency.

Dr Sukienik says that a key ingredient in Palm Beach’s success was working closely with each physician and continual oversight. A medical director or stand-in meets with each physician for 30-40 minutes at the doctor’s practice once or twice a month, and ACO representatives also meet regularly with staff at each office. “It’s really important to engage the entire office and not just the physician,” he says.

Particularly in physician-run ACOs, doctors may have to contribute to start-up and ongoing operational costs, but Dr Sukienik says Palm Beach has kept these costs low. To set up operations, “we didn’t ask for bank financing or money from a hospital,” he says.

Palm Beach runs a tight ship. Operating a small ACO is estimated to cost around $800,000 to $1 million a year, but Dr Sukienik says Palm Beach spends well below the normal amount because, for example, it doesn’t hire care coordinators—nurses who make sure patients are following their care plan. Doctors and their staffs do the work themselves, he says.

2. You’ll Need to Be Attentive to Costs

Doctors have often turned a blind eye to cost, saying they didn’t want money concerns to get in the way of providing high-quality care. But ACOs are forcing physicians to do both: focus on quality and on cost.

“The ACO is a big change, because for many physicians it’s often the first time they have had to grapple with costs,” Dr Sukienik says. In the old days, he says, doctors were sometimes simply irresponsible about spending money: “If a patient wanted an expensive test, the doctor might say, ‘You’ve got Medicare anyway, and they’ll cover it.'” So the test got ordered, whether it was prudent to order it or not.

Some doctors still believe that knowing the actual cost impairs their medical judgment. They’d rather just be concerned with the patient’s health and not have to view every care decision through the cost lens, because then they might be tempted to cut corners.

But, in fact, cost influences choice of care, including the decision to seek care, say the medical directors we spoke with. In a recent Gallup poll,[3] 33% of Americans said they skipped treatment owing to cost, up from 19% in 2001. For such reasons as this, “physicians are getting more aware of the cost of care,” Dr Sukienik says.

3. An ACO Is Very Different From an HMO

ACOs have frequently been likened to health maintenance organizations (HMOs), because both models try to save money. But Dr Pogue says ACOs take a very different approach than HMOs, without the features that have made HMOs so distasteful to doctors and patients alike.

“The HMO model is mainly about reducing cost,” Dr Pogue says, “but an ACO focuses on quality and the patient experience, in addition to cost.”

Another difference between the two models is in how they realize savings, says Joseph Habis, MD, medical director for the Meritage ACO, which is run by an independent practice association (IPA) in the wine country north of San Francisco.

The HMO saves money by putting primary care physicians (PCPs) in the uncomfortable role of “gatekeepers,” where they have to mete out referrals, tests, and prescriptions, Dr Habis says. If these doctors don’t keep a lid on costs, they’ll wind up spending more than the per-member, per-month payment they’re given. In an ACO, by contrast, patients can go wherever they like without having to get the PCP’s permission, and physicians continue to get a fee-for-service payment, he says.

In Meritage’s case, freedom of choice extends to physicians in the parent IPA. They don’t have to join the ACO, and in fact, only 250 of the 700 doctors in the IPA have done so. Dr Habis says giving doctors a choice means that those who have signed on are committed to the concept.

Observers have been concerned, however, about ACO patients’ ability to “wander” wherever they like, and rack up unnecessary expenses in the process. To combat this real threat, the Palm Beach ACO works hard to keep patients within the ACO. “You can mitigate the wandering. We educate our patients,” says Dr Sukienik. “We tell them, ‘If you want to go to a specialist, please give us a call first.'”

4. You Don’t Necessarily Work Harder in an ACO

Many doctors worry that ACOs will extend their workdays by requiring them to handle such tasks as managing data, writing up care plans, and coordinating care.

This doesn’t have to happen, says James Dom Dera, Jr, MD, medical director at the NewHealth Collaborative, an ACO in Akron, Ohio. Jointly run by Summa Health System and independent physicians, NewHealth saved Medicare $11.8 million and earned a$5.7 million bonus last year.

Dr Dera says doctors won’t have more work in an ACO because some of their responsibilities will be transferred to other workers. For example, NewHealth provides a dozen registered nurses to work as care managers for practices and plans to hire about six more this year.

He adds that physicians at NewHealth (and elsewhere) can adopt more-efficient processes with the help of “transformation experts,” who assist in redesigning the workflow using a team-based approach.

In his own practice, Dr Dera says he’s started using a “morning huddle.” Every morning, he meets for a few minutes with his medical assistant and administrator to discuss the day’s patients, identifying bottlenecks, safety issues, care gaps, and care opportunities. Because of this preparation, “the day runs smoother,” he says.

At Palm Beach, too, Dr Sukienik doesn’t think the ACO involves a great deal of extra responsibilities. “I know doctors are concerned that there’s going to be more work,” he says, “but it’s really the same amount of work they already do, only more coordinated.” Like Dr Dera, he spends time showing doctors how to streamline processes.

5. You’ll Need to Be a Team Player

Team care, which involves divvying up responsibilities according to each member’s training, is an important concept in an ACO, explains Dr Dera.

However, at Northwest Ohio ACO in Toledo, a joint venture between the Toledo Clinic and University of Toledo Physicians, some doctors initially fought being part of a team, according to Moshir Jacob, MD, one of the ACO’s four medical directors.”We follow the concept ‘tasks for staff, decisions for physicians,'” he says. “The higher-level decision-maker is not good at routine tasks. As a clinician, there’s no reason that I should be giving flu shots or ordering routine lab tests. That can be done by others.”

Dr Jacob says the ACO has dramatically lowered such indices as emergency department (ED) visits, hospital admissions, and cost per beneficiary, and is well on its way to earning a bonus. Whereas 20% of the bonus would go to the ACO, the rest would go directly to each provider, on the basis of the number of beneficiaries seen.

Despite this incentive, he says, some doctors didn’t give the ACO’s new care managers, who were supposed to work closely with each doctor, their full cooperation. “They refused to take their calls,” Dr Jacob says. “I had to speak to them about it. They don’t do that anymore, because they realize the care managers help them improve their patients’ outcomes.”

Research[4] has shown that when responsibilities are divided, a practice can save a significant amount of money. In one study,[5]having one assistant gather data during the patient visit allowed the practice to increase visits by 30% or more.

Nevertheless, Dr Jacob says working in teams is a difficult transition for many physicians. “We were taught to work individually,” he says. “We’re used to making our own decisions, taking our own approaches.”

In some practices, physicians do a variety of jobs themselves—even filling out forms or measuring blood pressure. But in an ACO, they’re expected to hand over these responsibilities to others, so they can concentrate on the work that only they can do.

6. The Data Provide Valuable Insights

ACOs collect a great deal of data on patients’ utilization of services and outcomes of care. Metrics are broken down by physician, and individually reported to them to guide them in creating care plans.

“The advantage of having the data is that you know a lot more about your patient, and that helps you improve cost and quality measures,” Dr Habis says. Without it, PCPs have little way of knowing when patients go out of network to get care—something that can put a damper on the ACO’s potential to earn a bonus.

“What the data show can be surprising,” Dr Habis says. “At Meritage, we thought our care coordination was relatively good, until we started discovering through the data that patients were being lost to follow-up, poorly compliant, and confused about discharge instructions. Patients were falling through the cracks.”

At NewHealth, Dr Dera says the metrics help PCPs follow patients, even those who aren’t in front of them in the exam room. “As a practicing family physician, I need to be able to identify patients not seen, care gaps, and the ever-important ‘hot-spotter’ patients who need more-intensive care,” he says. “The data help me do this.”

At Palm Beach, Dr Sukienik says he and other ACO representatives rely heavily on data in their regular meetings with each ACO physician. “The data are a great educational tool,” he says.

Dr Dera cautions that it’s not just data, but the kind of data being used, that’s important. “If you just use claims data,” he says, “you’ll get an incomplete picture.” Medicare claims data are many months old and won’t show past care, such as a colonoscopy paid for by a commercial insurer before the patient signed up for Medicare, he explains.

7. You Have Some Leeway in Applying Guidelines

CMS regulations governing ACOs require the use of evidence-based medicine (EBM), which involves basing clinical decisions on research results. A CMS summary[6] of the final rules for ACOs states that they should “have in place procedures and processes to promote evidence-based medicine, beneficiary engagement, and coordination of care.”

But Dr Dera says no one is expecting ACO doctors to constantly adhere to EBM. “For the majority of patients, EBM protocols are best,” he says, “but there’s a reason why they’re called ‘guidelines.’ Physicians should deviate from a guideline when it’s best for patient care.”

In fact, some authorities have attacked overuse of EBM. A 2014 article[7] in the British Medical Journal stated that it should be taken with a grain of salt because it’s based on studies of a wide group of patients and may not apply to the specific conditions of a particular patient. Comorbidities, for instance, often require a different approach, and sometimes standards have to be modified to deal with patients’ preferences.

Dr Habis says doctors at Meritage are also given a wide berth to deviate from guidelines. “Generally, physicians are allowed to use the guidelines as they see fit,” he says. “They’re allowed to differ in terms of style of practice. There isn’t one way of doing things.” For example, Meritage doctors can decide how often they see the patient and under what circumstances.

However, Dr Jacob at Northwest Ohio says physicians still need to take guidelines more seriously than they do now. “We can no longer say, ‘But this is how I do it’ or ‘This is how I was trained,'” he says. “We have to start applying EBM more widely.”

8. ACOs Raise the Stature of PCPs

The ACO can be an uplifting experience for PCPs. Having long felt marginalized in the healthcare hierarchy, PCPs are situated at the hub of medical care in an ACO.

For instance, although PCPs don’t have the gate-keeping role they have in HMOs—where they hold the purse strings and decide on referrals—in ACOs they’re still expected to coordinate services and provide disease management, and have been dubbed “primary care managers.”

“Under the ACO, the role of the PCP is going to change,” says Dr Habis. “The PCP is going to have more influence and play a leadership role.”

In that role, PCPs will need to keep a strict eye on what specialists do, because the ACO could be penalized financially if specialists order too many tests. PCPs also need to make sure specialists get test results promptly, so that they don’t order the same tests again.

In an ACO, PCPs are also encouraged to become what’s known as ‘patient-centered medical homes.’ Dr Dera says his own practice has been recognized as a level III medical home by the National Committee for Quality Assurance (NCQA). NewHealth helps him in this role by providing care management and a 24-hour, nurse-staffed call center, he says.

The BJC HealthCare ACO in St Louis also endorses medical homes. Dr Pogue says all BJC-employed PCPs have achieved NCQA level III recognition or are in the process of getting it. “This provides the beginnings of the primary care redesign process that’s necessary for the ACO to change our daily workflows to care for our patients differently,” he says.

How attractive is the star role that PCPs play in building solid ACOs? In a 2013 survey,[8] 61% of PCPs said they’d be willing to join an ACO—a higher rate than that of almost all specialties, including surgeons, radiologists, and emergency physicians.

9. Patients Will Be More Likely to Avoid the ED

According to Dr Jacob, one easy way for ACOs to realize savings is to make sure physicians are taking same-day appointments, which require the office to keep open a certain number of slots. For one thing, same-day scheduling makes it more likely that patients will keep their appointments—one study[9] found it lowered no-show rates by 10%—and out of the ED. “This is one of the best ways to reduce ED visits,” he says.

Dr Jacob says that whereas most PCPs at Northwest Ohio offer same-day appointments, many specialists do not, and in some cases, their offices are instructing patients seeking timely care to go straight to the ED.

“Sending patients to the ED doesn’t make sense, because they’re probably going to see an ED physician or a nurse practitioner who’s not familiar with them,” Dr Jacob says. And, in fact, they might not even need to be there. A 2012 study of ED patients[10]found that of those who weren’t sick enough to require admission, about 20% said they came because their doctor told them to.

Rather than sending patients to the ED, Dr Jacob thinks specialists should refer them back to their PCPs, who understand their care and can usually see them on the same day. As a practicing internist, he’s asked specialists to do this. “If I can avoid an ED visit, it’s going to affect our ACO’s bottom line,” he says.

10. ACOs Will Survive and Thrive

Many physicians are asking whether it’s worthwhile to get deeply involved in ACOs. Not only have most ACOs failed to earn bonuses, but they’re also part of the Affordable Care Act, which Republicans vow to repeal if they take over all branches of government in 2017.

The medical directors’ answer is plain and simple: ACOs are sticking around, no matter what. Even if ACOs were canceled, they would emerge under another name. These medical directors are also optimistic that most ACOs will eventually get on track and make money.

If and when the Republicans take over, “they’re not going to get rid of ACOs,” Dr Pogue says. “They meet aspirations for fiscal conservatism. They can preserve the Medicare program without busting the federal budget.”

But even if ACOs were abolished, Dr Dera expects they’d be replaced by something very similar, because the bloated healthcare system needs a value-based approach. “What it will be called 10 years from now doesn’t matter,” he says. “Even if it’s not an ACO, it will focus on value. A cost-saving mechanism will be needed, no matter what.”

In the event that ACOs were removed from Medicare, “commercial insurers and employers will carry the idea forward,” Dr Dera adds, noting that NewHealth recently signed an ACO contract with Humana covering about 7000 of its managed care members.

In fact, Medicare ACOs now account for only a fraction of total ACO activity. According to a new analysis[11] in Health Affairs, 132 different payers had signed ACO contracts as of January, and Medicare accounts for less than one third of ACO-covered lives.

“The lessons we’ve learned through the ACO would apply to whatever new systems would be coming our way,” Dr Habis says. “They’ve opened physicians’ eyes as to how much money is being wasted.”


  1. Medicare program; Medicare shared savings program: accountable care organizations. Proposed rule. Federal Register.December 8, 2014. Accessed May 27, 2015.
  2. Mostashari F, Sanghavi D, McClellan M. Health reform and physician-led accountable care: the paradox of primary care physician leadership. JAMA. 2014;311:1855-1856. Accessed May 27, 2015.
  3. Riffkin R. Cost still a barrier between Americans and medical care. Gallup. November 28, 2014. Accessed May 27, 2015.
  4. Katon W, Russo J, Lin EH, et al. Cost-effectiveness of a multicondition collaborative care intervention: a randomized controlled trial. Arch Gen Psychiatry. 2012;69:506-514. Accessed May 27, 2015.
  5. Anderson P, Halley MD. A new approach to making your doctor-nurse team more productive. Fam Pract Manag. 2008;15:35-40. Accessed May 27, 2015.
  6. Centers for Medicare & Medicaid Services. Summary of final rule provisions for accountable care organizations under the Medicare shared savings program. April 2014. Accessed May 27, 2015.
  7. Greenhalgh T, Howick J, Maskrey N; Evidence Based Medicine Renaissance Group. Evidence based medicine: a movement in crisis? BMJ. 2014;348:g3725. Accessed May 27, 2015.
  8. Accountable to whom? Physicians weigh in on value-based care. February 2013. Accessed May 27, 2015.
  9. Hoaglin M. Same-day appointments: why every doctor should offer them. Practice Fusion. December 12, 2013. Accessed May 27, 2015.
  10. Gindi RM, Cohen RA, Kirzinger WK. Emergency room use among adults aged 18-64: early release of estimates from the National Health Interview Survey, January-June 2011. National Center for Health Statistics. May 2012. Accessed May 27, 2015.
  11. Muhlestein D. Growth and dispersion of accountable care organizations in 2015. Health Aff (Millwood). March 31, 2015. Accessed May 27, 2015.

Medscape Business of Medicine © 2015  WebMD, LLC


Posted by:  The Wealthy Doctor




What You Need To Know About Accountable Care Organizations - overview

Summary: Accountable care organizations (ACOs) can seem complex and unfamiliar to physicians—even those who are participating in one of them. There are risk-taking and shared-savings arrangements, both of which depend on a hospital- or physician-led organization meeting goals tied to quality measures, but each model uses different formulas to allow physicians to share in any potential savings.

Share this article: