Health Affairs

Next Steps For Accountable Care Organizations

Bethesda, MD -- In April 2012 a number of accountable care organizations (ACOs) will begin their contracts with the Centers for Medicare and Medicaid Services (CMS) under Medicare's Shared Savings and Pioneer ACO programs. This latest health policy brief from Health Affairs and the Robert Wood Johnson Foundation provides an overview of ACOs, their origins, and the current status of adoption by Medicare and private health insurance plans.

ACOs are an alternative to the fee-for-service model of health care payment and are designed to encourage quality care while reducing the unnecessary use of resources. They are also intended to reduce fragmentation of care and to improve care coordination, which could lead to lower health care costs. Financial bonus payments are to be awarded to organizations that meet predetermined goals, and in some models, penalties will be extracted from those that do not.

The brief covers the following:

• How the ACO model grew out of experiments in the 1970s, 1980s, and 1990s with joint ventures between physicians and hospitals and later health maintenance organizations.
  
  
• How the ACO model was first envisioned and articulated by Elliott Fisher of Dartmouth Medical School in 2007.
  
  
• How more recent experiments that have paved the way for ACOs, such as CMS's Medicare Physician Group Practice demonstration project, have fared and the challenges they have encountered.
  
  
• The future launch of two types of ACO models under Medicare--the Medicare Shared Savings Program and the Pioneer program, which will involve 32 organizations participating in a three-year pilot study.
  
  
• The growing number of ACO contracts being put in place in the private sector between health care payers and providers.
  
  
• The possible savings to Medicare: CMS estimates that the Medicare Shared Savings Program will generate up to $940 million in net savings during its first four years, assuming that 270 ACOs sign up to participate. Whether this level of projected savings is optimistic, or conservative, remains to be seen.

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears each month in print, with additional Web First papers published weekly at www.healthaffairs.org. You can also find the journal on Facebook and Twitter and download Narrative Matters on iTunes. Address inquiries to Sue Ducat at (301) 841-9962 or sducat@projecthope.org