The New Health Dialogue

Health reform isn’t just about covering more Americans, it’s about changing the way we provide health care so that it is less costly and better quality. One  model that would expand under health reform is the Accountable Care Organization, like one NPR reported  on today.

An Accountable Care Organization, as we’ve said before, can take many different forms. But it generally has three essential components: a primary care practice, specialists, and one or more hospitals. In an ACO, these three components must work together to provide high quality, cost effective care for their patients. NPR’s Sarah Varney describes an ACO in terms of construction. The goal is to get all parties financially invested in a positive, cost effective outcome:

An ACO is a bit like a building contractor. The contractor gets together with some other contractors -- plumbers, electricians, roofers -- and they agree to repair your house for a set amount of money.

In an ACO, providers and doctors agree to take care of a patient for a set amount of money, and get to keep any money that doesn’t go toward care -- so they have a financial interest in keeping costs down (preventing abuse of the fee-for-service system seen in places like McAllen, TX). The ACO payment system also rewards quality. When providers meet or exceed care quality standards, they can earn additional financial rewards. Current health reform legislation from both the House and Senate encourages the formation of ACOs in Medicare (and the private sector can follow suit).

The idea of an ACO isn’t brand new -- successful models exist across the nation. One example is Dr. Alexander Terrazas' family practice in Redlands, CA, which NPR called a “poster child” for ACOs. Despite its small size (only three doctors) Dr. Tezzaras practice achieves high scores in quality and cost savings that are usually only attainable for larger more elite systems, reports NPR. Dr. Terrazas started accepting fixed monthly fees per patient all the way back in 1984, and today about half of his patients are covered under such global payments. To make the system work:

The clinic has to stretch the so-called global payment to cover all of the patient’s visits, any specialist referrals, lab tests, even surgeries and hospital stays. If there’s a surplus left over, the partners divvy it up. If they’re over budget, they take a hit.

…Terrazas says he has managed to make it work by reassuring his patients that their doctors aren't shortchanging them on quality to make a bonus.

"We had to get the patients comfortable that they were going to receive whatever care they needed," he says. "If they needed orthopedic surgery, we're going to get you to the orthopedist."

The practice keeps a close eye on quality care standards. For example, the clinic is very attentive when patients make a transition out of the hospital, Sandee Derryberry, the practice's executive director, told NPR. As we’ve mentioned, the ‘revolving door’ in and out of the hospital when patients don’t get good follow up care is costly and hurtful to both providers and patients alike. The practice also meets monthly to compare notes on things such as how often they charge for medical services or refer their patients to specialists. According to NPR, Dr. Terrazas’s practice spends about 15 percent less than the regional average.

But the California practice faces challenges. As private insurance premiums continue to rise, Dr. Terrazas told NPR, patients demand more and more medical services -- regardless of whether  they add value to the patient’s health. Terrazas doesn’t think ACOs are likely to become widespread, as they require time, commitment, and expertise on the part of doctors and providers, and more importantly, they require that someone, somewhere in the system takes a partial pay cut when unnecessary services are phased out, reports NPR.

But that hasn’t stopped reformers from giving ACOs, and other Medicare pilot programs a chance in current health reform legislation. As NPR says,

Congressional leaders and health system reformers… are optimistic there are enough incentives in the bills for physicians to at least give it a try.

For more about ACOs in action, listen to one of our Health CEOs for Health Reform, Donna Katen-Bahensky, talk about her organization’s experience with the principles of accountable care.