Frequently Asked Questions
Here are some commonly asked questions about ACOs gathered from hospitals, physicians, and Boards across the country:What is an ACO?
With the passage of the Patient Protection and Affordable Care Act, beginning January 1, 2012, ACOs are organizations of hospitals, physicians, and other healthcare providers who voluntarily identify themselves as 1) able to provide healthcare for a critical mass of 5,000 Medicare FFS individuals; 2) willing to take responsibility for overall costs and quality of care for a population across the continuum of care; 3) have the size and scope to fulfill the responsibility. They will be eligible for a piece of the shared savings they achieve for Medicare FFS if they meet quality thresholds. It is anticipated that commercial payers and other governmental payers will adopt the shared savings approach with self-identified ACOs.Who can be an ACO?
- Integrated delivery systems
- Physician hospital organizations ("PHOs")
- Independent practice associations ("IPAs")
- Partnership of PHOs and IPAs
- Large group practices
How do we qualify for the program?
- Become accountable for the quality, cost, and overall care
- Minimum three-year period
- Have a formal legal structure to receive and distribute payments for shared savings
- Have enough PCPs
- Have a minimum of 5,000 Medicare FFS beneficiaries
- Leadership and management structure that includes clinical and administrative systems
- Processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care
- Meets patient-centeredness criteria
What if we don't want to participate?
At this point, participation will be voluntary. However, in order to help pay bonuses to ACOs that perform well, Medicare FFS payments will be constrained. So if you want an opportunity to increase (or even just retain) your revenue from Medicare patients, organizations should consider participation as an ACO.
Do we have to form a new entity?
That depends on how you are currently organized. If your organization already has a network of providers in place that are clinically and/or financially integrated to provide high quality care to a defined population, you may only need to make modifications to your existing structure or financial relationships. If, however, you have many independent physicians and healthcare providers in your market that do not have a structure in which they make joint decisions, can allocate payments, and coordinate and share financial, utilization, and quality data, then, yes, you will most likely need to form a new entity.
How many ACOs can/should a hospital have?
Most hospitals will only have one, but may participate as a provider in the network for others. For example, an academic medical center may be part of the network of many other community hospital-sponsored ACOs.
How will ACOs affect hospital/health systems' board responsibilities and accountability?
It depends. If your organization is an integrated delivery system, it may already qualify as an ACO, in which case the Board will retain the same oversight. If the ACO is set up as a PHO or through a physician group structure, the ownership and governance structure of the ACO entity will dictate the ACO Board's scope of responsibilities. Regardless, the quality, service, and financial performance of the healthcare facilities will continue to be an obligation of the hospital/health system Board.
Does this mean that ACOs will replace Medicare Advantage?
No. Medicare Advantage will still be part of Medicare's arsenal to control the rate of increase to the costs of healthcare. ACOs are another proposed solution to assist in that effort.
How is this different from Medicare Advantage?
Medicare Advantage relies on private insurance companies to build a network of providers, sell its product to Medicare beneficiaries, and manage utilization, cost, and quality. Hospital and Physician Providers receive reimbursement that has been negotiated and contracted with the private insurance company. An ACO has a direct relationship with Medicare to serve Medicare fee-for-service (FFS) beneficiaries. Providers will continue to receive their Medicare FFS payments and will be eligible for a bonus if quality and resource use targets are met.
Does this mean that we take capitated payments?
Not necessarily. The legislation allows for the possibility of payment based on partial capitation, but the "core" ACO concept is built around fee-for-service with shared savings once quality and cost targets are met.
How is this different from gainsharing?
Gainsharing encourages hospitals and physicians to work together within specific service lines (e.g., orthopedic) to gain efficiencies and reduce costs. ACOs are broader, can be more comprehensive, and focus on a population of Medicare beneficiaries versus a specific service line. Will this affect our payments from commercial health plans and payers? What about Medicaid? ACOs are proposed as a model for Medicare. However, should they prove successful as a model for containing costs, we anticipate other payers, including commercial payers, would begin looking to introduce similar payment models. Medicare has often been a bellwether for payment reform across payer types.
How do I know it is right for my organization? What are the implications of ACOs we should consider?
Ultimately, it depends on each organization and the organization's level of existing integration to determine whether or not an organization is ready to participate as a Medicare ACO. However, understanding the implications and risks of Medicare's new push for accountability for both hospitals and physicians is worthy of every organization's attention - if only to begin to strategically plan for the future.
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