Medicare ACOs: Stroke of Genius or Mathematical Impossibility? (Part 1)

The big buzz these days is about ACOs.  In this series, we will discuss some of the features of Accountable Care Organizations and explore the overall question:  Are Medicare ACOs a stroke of genius or a mathematical impossibility?  This five-part series explains the ACO concept and the financing component.


No one can deny that our current health care system is in serious need of an overhaul, and that certain demographic characteristics of our population are prompting an intervention or our system is doomed to insolvency.  People are living longer thanks to all the miracles of modern medicine, technology and pharmaceuticals, and they are doing so with multiple chronic conditions. In the ‘silo’ form of healthcare we have come to know, each practitioner works independently which often results in higher costs due to duplication of services and/or complications that could have been avoided if each provider knew what the other was doing. We can debate whether the Medicare program has exacerbated this flaw, or even facilitated it, but the issue that goes to the heart of the ACO concept is that – to put it bluntly – no one’s driving the bus.

ACOs are gaining traction as providers collaborate in this new shared savings program alternative to traditional fee-for-service (read: fragmented, inefficient, over-utilized and soon-to-be-bankrupt) Medicare. Under this arrangement, providers will join together to provide a continuum of care that focuses on wellness and quality, as opposed to volume. Its description is of a win-win system where efficiency and quality are rewarded and incentives exist for providers to work together to that end.

By way of a brief summary, ACOs will participate in Medicare’s Shared Savings Program (MSSP) and hearken back to the old days when the family physician knew each patient’s health history inside and out, and patients relied on his judgment and treatment of pretty much every condition.  The ACO is an effort to put someone in the driver’s seat of the patient’s care and to encourage (and require) all the practitioners to be on the same treatment page.  This exercise should have several benefits, the most important being a healthier patient and lower overall healthcare costs.

For those of us who have been around the Medicare Advantage block and can manage risk contracts in our sleep, this is a no-brainer. We’ve been doing it a long time. There are, however, some important distinctions between the traditional MA MSO or IPA (physician groups that have contracts with MA plans which often involve varying degrees of risk for the cost of patient care) and the ACO.  We will explore these distinctions throughout the series.

In part two of this five-part series, we will consider the Medicare beneficiary’s relationship with the ACO.

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