What is an ACO?

Many of you have probably never heard of an Accountable Care Organization (ACO), but many of you will begin hearing about them in the coming months due to their role in the Patient Protection and Affordable Care Act.  Due to their complexity, I will be making multiple posts describing them as well as highlighting how they may or may not influence your current practice.  Much of the data I will be quoting was provided by The Integrated Healthcare Association, a not-for-profit multi-stakeholder leadership group located in CA http://www.iha.org/.
Definition:   An ACO is a group of providers that work together in controlling health care costs while improving quality of care.  The group may or may not include a hospital in their structure.  They have traditionally been the operative arm of HMO contracts, where capitated rates could be paid to an ACO for the care of a group of participating patients, usually no less than 5000 in number.  In very simplistic theory, if the group kept their costs below their capitation pool total, they were rewarded by keeping the surplus.  The risk being that if the provided services exceed their capitation pool, they lost money.  Big picture: generally cut back on patient services, the ACO makes money.  The balance for patient protection was provided via various regulatory statutes on the ACO by the state of CA.
History:  When I started researching ACO's, I was under the impression they were a relatively new phenomena.  However, they have been present in California for 30 years and provide 54% of the medical services provided to insured Californians.  The largest of these groups is Kaiser Permanente, which provides service to over 6.6 million people.  There are 285 physician organizations (ACO's) in CA that range in structure and size, as well as the contracts they serve.  These variables make the topic quite confusing and complex when trying to apply it to your own zip code.
Relevance:  Health care providers need to understand the implications of ACO's, because they are a major structural tool that Medicare and other insurance providers intended use to address the demands of the Patient Protection and Affordable Care Act, aka "Obama-care," in CA and across the country.  For an Obama-care refresher, you can find details at: http://dpc.senate.gov/healthreformbill/healthbill04.pdf.  Currently, trial markets across specific areas of the US are participating in data collection that will help define future ACO structure.  South Orange County, CA  is one of these areas and the primary reason why I am investigating this topic.
Details:  Let's look at some of the ACO details to help you better understand what they really present to the health care community.

1. Size: ACO's can range in size from <5000 enrollees (26% of ACO's) to >100,000 enrollees (8% of ACO's).  The size of a group does not dictate the profitability of the group, however, larger groups benefit from modest economies of scale when investing in their infrastructure (IT, electronic records, supporting programs).
2. Structure:

• Integrated Medical Groups (IMG).  133 groups in CA.  They are groups of primary care and specialty physicians that are usually associated with a hospital or community clinics.  ( Example: Kaiser).   
• Independent Practice Associations (IPA).  152 groups in CA.  It is an umbrella organization that encompasses solo practitioners and small to mid-size groups.  This format serves 4.8 million HMO enrollees, where the network performs many of the same tasks as an IMG: contracting, paying physicians, providing information technology services, billing services, etc.  (Examples: Monarch HealthCare, Sharp Community Medical Group).
• Some organizations incorporate both models.
• Structure has not been directly linked to profitability or quality of care of a group.

    3.  Insurances:  The initial intent of an ACO was to provide capitated service to private HMO participants, Medicare (HMO), and Medicaid participants.  They have traditionally had trouble attracting PPO business, but due to the leveling of HMO and PPO costs (similar monthly premiums) and several other factors, this is no longer a cut and dry issue.  This key aspect of the insurance make-up of an ACO has been changing in certain markets and has the potential to significantly change in the future.  This will be the key topic I will touch on in my next post.  It is very important to understand that the regulation of PPO contracts (and the services they provide their members) is much less regulated than HMO contracts in CA.  See the California Department of Managed Health Care (DMHC).  As a result, if ACO's start attracting PPO clientele through more promising rates and better coordinated care, there will be very little watch dog supervision over them.  Did I mention that ACO's are Stark exempted as well?   Maybe you can start to connect the dots and see how this is going to effect PT.  Imagine your Medicare patients and a large chunk of your private pay patients becoming ACO participants during future open enrollments.  For them to continue to seek your services, they will have to pay more to go outside their network, similar to our current PPO provider network arrangements.  The difference in this case is that as an isolated PT provider you will have a marginal chance at becoming a future preferred provider and the pool of patients you will be out of network on could be greater than 300,000 patients (in the case of South Orange County, CA).   Do you think that your PT clinic could be influenced significantly?  Think about that for a few minutes....  There will be much more to come on the PPO/ ACO topic in my next post.  At least now you should have a feel for what an ACO is if you hear about one forming in your backyard in the coming months, and have justification for the headache that ensues.