Top 3 Ways Accountable Care Organizations Could Garner Savings

May 26, 2016 - Payers and providers looking to operate through an accountable care organization (ACO) will need to adhere strictly to state and federal laws regarding the development of this model of care. Accountable care organizations are responsible for the quality and cost of care among a certain patient population and must abide by the laws and regulations that the federal government has passed in terms of ACO development.

Review state laws for ACO management

The National Law Review also discussed the importance of adhering to state laws with regard to operating an accountable care organization. There are various decisions that need to be made when forming an accountable care organization including who can employ physicians and the type of control that can be exerted between payers and providers operating an ACO. all of this directly relates to state laws and healthcare regulations.

The state of Michigan, for example, has a law called the “corporate practice of medicine”  doctrine, which affects of the design and management of an accountable care organization. This type of law essentially establishes that a layperson does not have authority over a medical professional to assert control over medical decision-making.

Whenever an accountable care organization is established as a professional service facility, the “corporate practice of medicine” doctrine applies. This type of law is meant to ensure that private and confidential information between patients and doctors remain secure and any medical decision-making is not profit-driven.

In the state of Michigan, accountable care organizations will need to be  created as a nonprofit or a professional services entity in order to avoid breaking the “corporate practice of medicine” doctrine.What other states have more clearly defined rules, Michigan’s doctrine does not offer guidance on how much control could be positioned over a healthcare provider.

As such, it is difficult to determine if accountable care organizations have the right in Michigan to assign physicians participating in the ACO to use certain medical imaging services or laboratories. Accountable care organizations should work with doctors to avoid any potential privacy risks and ensure that medical decision-making is left up to the physicians.

Invest time and commitment

Along with abiding by federal and state laws, there are several steps that accountable care organizations can take to ensure success in the healthcare market. It is necessary to invest the time and remain committed when operating accountable care organizations in order to reap the cost savings of such endeavors.

“True transformation is a long-term endeavor,” said Amy Oldenburg, Vice President of Network and Product Strategy Accountable Care Solutions at Aetna.  “We know that it takes at least three years for motivated ACOs to make changes necessary to impact real savings and quality improvements.”

Accountable care organizations operating through the Medicare Shared Savings Program have had the greatest cost savings when remaining in the program for the longest time.

The results show that Pioneer ACOs brought in the greatest shared savings during their third year of operation as compared to their first year. Even in their second year of operation, Pioneer ACOs garnered in an additional $9 million in savings.

“We believe transforming health care will help reduce waste, improve quality, improve member/patient satisfaction, and improve overall employee health and productivity,” Oldenburg mentioned. “So we see this as well worth the commitment and investment of time and resources to get there. Through our approach to move providers and hospitals toward full, product-based risk-sharing ACOs and helping them transform the way they do business, we know we can help build a healthier world.”

Pursue risk-based payment contracts

In order to reach the shared savings and obtain the revenue needed to maintain a successful ACO, it is beneficial to invest in risk-based payment arrangements with payers, said Mark Wagar, President of the Heritage Medical Systems.

“While they need to be careful about assuming more risk, I think the biggest thing for ACOs is to be more aggressive,” Wagar explained. “There are too many healthcare organizations with potential that are sitting on the sidelines and saying ‘Let’s do just shared savings because we can’t lose. We will bill for fee-for-service and if we happen to improve things, we get a bonus but otherwise, we don’t lose.’”

“While that may be a comfortable spot for healthcare organizations that aren’t familiar with value-based care in its more mature forms, it limits how much they can really control decision-making.”

“Particularly if you’re a physician-driven organization like Heritage, it’s very important to assess best practices quickly, put them into effect quickly, and be candid with your physicians and the entire delivery system about best practices, disparities between different delivery systems, and ways to get the best outcome.”

“I think there is potential positive news with the movement of the federal ACOs toward risk-sharing and risk-assumption,” Wagar continued. “When we got into our Pioneer ACO, we were one of the first and we’re still staying in it and will move onto the next phase because we want to help demonstrate that independent practices as well as our large group organizations can have impact.”

Providers and payers partnering through risk-based reimbursement structures and embracing value-based care payments can actually benefit the patient community by improving the quality of medical services.

The Medicare Shared Savings Program, for instance, was created to bring more providers to form risk-based payment contracts. However, some accountable care organizations have dropped out due to less monetary savings initially expected. Without risk-based reimbursement, these ACO providers were less likely to garner the cost savings they hoped.

Payers and providers who partner to form accountable care organizations would benefit from adhering to state and federal laws, investing the time and resources necessary to operate this model of care, and pursuing risk-based payment contracts.

Dig Deeper:

Physician Leadership Key to Accountable Care Organizations

Payers Continue Favoring Accountable Care Organizations