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May 20, 2014

ACO Update: Total ACOs Top 520; Concentrated in Florida, California, and Northeast

New research from the consulting firm Oliver Wyman estimates there are now 522 accountable care organizations (ACOs) serving 15-17 percent of the U.S. population, or 46 to 52 million people. Their latest report, published in April 2014, also states that more than two-thirds of the U.S. population now live in localities served by ACOS, and more than 40 percent live in areas served by two or more.

An ACO is a network of doctors and hospitals that share the responsibility for providing coordinated care to patients in order to limit unnecessary spending. ACOs are intended to foster greater accountability in traditional fee-for-service Medicare programs by rewarding participating healthcare provider groups that realize the two hallmarks of healthcare reform: slower spending growth and higher-quality care. Those that save money while also meeting certain "quality targets" are entitled keep a portion of the savings.

The 522 total ACOs represents a definite upward trend—the number has doubled since early 2013. Specifically, Oliver Wyman found 370 ACOs in September 2013 and 259 in February 2013. The firm has tracked ACO figures based on the Department of Health and Human Services' announcement of ACOs approved to participate in Medicare's ACO programs.

The study also found that about 5.3 million Medicare beneficiaries, or about 10 percent of total Medicare beneficiaries, will now receive their healthcare from ACOs. The number of beneficiaries served has risen by 32 percent since July 2013 and by a total of 120 percent since January 2013. As far as non-CMS patients in CMS ACOs, the study states that "Most Medicare ACOs also serve non-Medicare patients. ACOs will typically start entering ACO contracts with commercial and Medicare Advantage payers soon after they start in a CMS ACO, or apply for Medicare Shared Savings soon after their first commercial contracts." Thirty-three million non-Medicare patients are served by Medicare ACOs, up from 25 million in July 2013 and 15 million in January 2013.

Finally, the study noted that "Non-Medicare ACOs are difficult to count, because there is neither an official list nor an official definition." For their study, Oliver Wymen defined a non-Medicare ACO as "any provider organization with at least on shared-savings or share-risk arrangement with at least one commercial payer but not with CMS." They found 154 non-Medicare ACOs, compared to 135 in July 2013 and 124 in January 2013, representing 14 percent and 24 percent growth respectively.

A separate report published in Health Affairs indicates where ACOs have been forming across the country.

Clearly, ACOs have formed largely on the east coast. Interestingly, with some exceptions, from 2012 to 2013 the placement of ACOs does not appear to have changed, but they have rather just become more concentrated in the same areas. (Image reproduced from the Healthcare Blogs' coverage of the Health Affairs study).

While providers that save money while also meeting quality targets are entitled keep a portion of the savings, some could also be at risk of losing money. Two other issues have been in the news regarding ACOs recently: insufficient bonuses and unrestricted patient choice.

Insufficient Bonuses

"The ACO model is a good step forward toward transforming our delivery system, but its current structure is not sustainable given diminishing returns for providers," according to the American Hospital Association (AHA).

On April 17, AHA sent a letter to Dr. Patrick Conway, the Innovation Center's acting director, which stated that the financial risks outweighed the potential bonuses for hospitals under the Medicare shared-savings program, the accountable care initiative created under the Affordable Care Act. Modern Healthcare reports that AHA is lobbying the CMS Innovation Center to make it easier for accountable care organizations to earn Medicare bonuses and delay potential penalties as CMS looks to expand the initiative.  Meanwhile, benchmarks to earn shared savings are too high and quality metrics are too complicated, the AHA said.

Few ACOs of those with enough time to calculate savings have earned bonuses. Initial results show one-quarter of the 114 organizations in the program's first round will receive a share of savings.

Unrestricted Patient Choice

According to a JAMA articlepublished April 21, "[f]ostering accountability in the Medicare Accountable Care Organization (ACO) programs may be challenging because traditional Medicare beneficiaries have unrestricted choice of health care providers, are attributed to ACOs based on utilization, and often receive fragmented care."

The study showed that one-third of Medicare beneficiaries assigned to ACOs in 2010 or 2011 were not assigned to the same ACO in both years and much of the specialty care received was provided outside the patients' assigned ACO. Some argue that that suggests challenges to achieving organizational accountability in Medicare. Medicare beneficiaries are not required to pick a primary care physician, so Medicare uses utilization rates to assign patients to ACOs.

Paul B. Ginsburg, Ph.D wrote that the Affordable Care Act "essentially left beneficiaries out of the [ACO] equation, not offering incentives to choose an ACO or to commit - even softly - to its health care providers," as reported by Medical Xpress. "This absence may severely undermine the potential of this approach to improve care and control costs."

The article analyzed fairly old data considering that ACOs have been drastically expanding, so it will be interesting to see how current ACOs handle the utilization model.

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