Accountable Care Organizations: Health IT's Critical Role

by Bruce Merlin Fried, Esq.


One of the most significant provisions of the Patient Protection and Affordable Care Act can be found at section 3022, the Medicare Shared Savings Program. That's where you will find the legislative authority for accountable care organizations (ACOs).

Most succinctly, PPACA authorizes Medicare to enter into contracts with ACOs -- groups of physicians, hospitals and other health care providers -- which are willing to be wholly accountable for beneficiaries assigned to them. The participating doctors and providers would receive their regular Medicare fee-for-service fees. ACOs that deliver high quality, coordinated care at a total cost that is less than what would otherwise be expected will share the resulting savings with the federal government. Think: provider-driven managed care. More specific information on Medicare ACOs is available in a CMS Q&A, and for a grin check out this YouTube video.

Some may wonder: Why bother? What is the policy rationale for ACOs?  ACOs are one of several "value" strategies intended to encourage care coordination, avoid unnecessary care and deliver high care.   

The ACO program is set to launch in 2012, with draft regulations expected before the end of this year. Already, ACOs have generated remarkable interest, excitement and anxiety. At every public event on ACOs, whether officially sponsored or hosted by private interests, hundreds of people are showing up. Recent ACO conferences have turned away would-be registrants. 

ACOs have the potential to transform the health care system in ways that many see as essential and overdue. At the same time, ACOs may disrupt existing and longstanding economic and political relationships. Some argue ACOs will die on the vine, while others are not waiting for the government and are already constructing ACOs to take to the commercial insurance market and directly to employers.

Health IT's Critical Role in ACO Success

While ACOs offer great promise, there are a number of difficult policy and operational issues that will have to be overcome if the promise is to be realized. One critical issue will be recognizing and integrating the role of health care IT into the overall ACO strategy. There are a number of health IT issues; here are a few of the big ones.

Jumping the Antitrust Hurdle

One of the legal issues that could be a barrier to the development of ACOs, is antitrust law. In particular, the concern is that, purposefully or otherwise, ACOs may become sufficiently large and exercise such market dominance that what results will be anti-competitive and monopolistic. This is not an unreasonable concern. Indeed, at a workshop on ACO antitrust and fraud and abuse issues jointly sponsored by CMS, the Federal Trade Commission and the HHS Inspector General on Oct. 5, the chair of FTC noted that while antitrust law would not be a barrier to ACOs, those hiding behind ACOs to achieve unlawful anticompetitive advantages would not be tolerated.

In health care situations where antitrust concerns have come up, antitrust law enforcers have found some pro-competitive effects that outweigh their anticompetitive concerns where there is substantial clinical integration. A very senior antitrust official has described "clinical integration" as being comprehensive, coordinated programs of care management designed to improve quality and cost-effective care through use of IT systems, practice guidelines, care protocols, referral policies and quality benchmarks ... to align efforts to improve health and delivery of services. 

Put more directly, absent health IT systems, the ability to achieve substantial clinical integration is nil. And, in that circumstance, the ability to overcome antitrust concerns will be much more difficult.

Care Coordination

Throughout Section 3022 of the health reform law are provisions that obligate ACOs to coordinate care. The law directs the HHS secretary to "establish a shared savings program that ... coordinates items and services under [Medicare] parts A and B. ... Under such program (A) groups of providers of services and suppliers ... may work together to manage and coordinate care."

Given that ACOs will be required to coordinate all necessary care for at least 5,000 Medicare beneficiaries and coordinate among scores of physicians, hospitals and other providers, ACOs will require significant IT resources. In fact, for an ACO to be eligible to participate in the Medicare Shared Savings Program, the ACO must "coordinate care, such as through the use of telehealth, remote patient monitoring and other such enabling technologies."

It is noteworthy that the specific reference to telehealth and remote monitoring did not appear in the legislation until the very last draft that was ultimately enacted. Hats off to the telehealth and remote monitoring lobbyists. But, this specific reference should not be read as giving these technologies some exclusive corner on ACO health IT resources. Indeed, the complexity of care coordination will require a wide range of health IT infrastructure and skills that include ubiquitous electronic health records and health information exchange tools, as well as disease registries, scheduling programs and sophisticated disease management tools.

Data Collection and Reporting

The health reform law also requires ACOs to collect and report a wide range of data, including information on the professionals participating in the ACO to facilitate the proper assignment of beneficiaries to an ACO. ACOs also will be required to report on quality measures, including clinical processes and outcomes, patient experience of care and utilization. 

Once again, a robust health IT infrastructure will be essential if ACOs are to meet data collection and reporting requirements.

Making ACOs Viable in Rural America

Historically, managed care efforts have been largely unsuccessful in rural and frontier America. The reason is fairly obvious -- managed care is most successful where there is an adequate concentration of consumers and where providers are sufficiently concentrated. 

That is likely to be the case with ACOs, too. The one prospect for success is to use the full range of health IT resources, perhaps most significantly telehealth, to provide beneficiaries in rural areas with meaningful access to the ACO's professionals and services and to facilitate the coordination of care among a dispersed network of care providers.

But ... Where's the Investment Capital?

Can health IT meet this challenge? Sure it can. But only if the resources are available. Therein lies the rub.

Many large institutions will have the wherewithal to deploy EHRs, health data exchanges, monitoring, disease management, coordination, scheduling tools and other technologies that will be required. I presume that with some adjustment to budgets, the major integrated care systems can be ACOs tomorrow. These would include Geisinger Health System, Mayo Clinic, Cleveland Clinic, Intermountain Healthcare and, of course, Kaiser Permanente. Many of the large hospital systems could acquire, allocate and deploy the necessary health IT in short order, as well. Even a very few multispecialty physician groups might be able to get there.

But for the dozens of other ACO wannabes, the first major challenge will be finding the capital that will be necessary to acquire and deploy the health IT that will be needed. The health reform law is quite clear -- doctors, hospitals and other providers will be paid their fees under Medicare parts A and B. If the successful ACO meets its savings target, it will receive some portion of that savings (this alone is a challenge since it is likely that it will take CMS many months to calculate savings and pay ACOs what they are due). There is no source of capital in those economic arrangements. Even under a partial capitation model, which would presumably make payments in advance of care, there is no start-up capital specified.

Absent some source of investment capital, the prospects for ACOs emerging from physician groups, safety net providers or many community hospitals is remote. Given the newness and uncertainty of the program (hopefully resolved, at least in part, when the ACO regulations are published in December), what private investor would take the risk of investing in such an undertaking?

Some are suggesting that a portion of the $10 billion allocated for the Center for Medicare & Medicaid Innovation might be tapped as a source of seed funding. Whether in the form of grants or loans, this strikes me as exactly that sort of program the CMI should be undertaking and investing in.

Unless CMS or HHS steps up to make essential economic investments in start-up ACOs, I fear the program will succeed in a few areas of the country, but never reach most areas where beneficiaries and the health care system itself would most benefit from better coordination, higher quality and greater value.

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