In my last post I gave an overview of what Accountable Care Organizations (ACOs) are.  Before I start to explain the care coordination strategies they commonly use,  I’d like to go a little deeper into how an ACO has patients (Medicare beneficiaries) attributed to it and where savings can be found while maintaining quality.

Beneficiary Attribution

Let’s consider an ACO formed by a primary care medical group.  These physicians practice primary care and would include family practitioners, internists and, since the patients we’ll talk about are Medicare beneficiaries, geriatricians.  Medicare would look at all the claims for services of any patient the medical group took care of within the past several years (usually 3).  Medicare determines from which physician the patient got most of their primary care services & attributes that patient to that physician.  A key point to remember is that even though a Medicare beneficiary is attributed to a specific primary care physician, the patient can see any physician they want.  The patient is not a “member” of the ACO.  However, since that patient is attributed to the ACO, all their health care services become the responsibility of the ACO to coordinate.  The patient has all the freedom to go to any physician in the country who accepts Medicare for their health care needs.  They are still regarded as being in the traditional Medicare program.

Cost Benchmark

Once Medicare has attributed their patients to the ACO, it calculates a cost benchmark that will serve as the target for the ACO.  The benchmark is derived by a formula that looks at the previous three years of costs for the attributed beneficiaries and is adjusted for inflation.  If the ACO is able to provide quality care as measured by 33 quality measures and keep costs under the benchmark they will share in a portion of the savings with Medicare.  For most ACOs there is no penalty if costs are over the benchmark.  The ACO is not responsible for paying the care providers.  Medicare still does that.  Remember, the costs are all the costs (except Part D drug costs) for the attributed beneficiaries, including hospitalizations, tests, surgical procedures and physician charges.

Cost Reduction Opportunities

So where will the savings come from?  There are several main areas – areas that won’t compromise quality, but rather increase it.  Our system of health care delivery is hardly an efficient one.  Important clinical information is often not transmitted promptly to the next person involved in a person’s care.  Consequently, tests are often repeated unnecessarily.  More importantly misunderstandings and miscommunications can result in complications and poor clinical results that require more services which just add to the costs.

In my next post I’ll talk about the opportunity surrounding hospital discharges as an example of how care coordination can improve quality and lower costs.

For Your Health – Dr. Bob