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Understanding Accountable Care Organizations (ACO)

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Physicians are practicing in a changing environment where governmental payers, the employer community and commercial health insurance companies are pushing for more integrated health care systems where physicians and hospitals are held accountable for the overall cost and quality of care. Regardless of the ultimate success of Medicare Shared Savings Program and other government-sponsored Accountable Care Organization (ACO) programs, it is likely that most, if not all, physicians will need, or at least be asked, to participate in more integrated health care systems requiring more communication, care coordination and quality measurement reporting.

This resource, developed by the AMA and outside experts, discusses key issues that arise when physicians themselves create or are asked to participate in ACOs, whether publicly or privately funded.

Download Chapters

Explore the various ACO options physicians have in this changing environment, including the benefits and challenges associated with establishing or participating in health care provider collaboratives. Download the complete manual or individual chapters to learn how ACOs may affect patient care, practice management and private payer options.

ACOs and Other Options: A “How to” Manual for Physicians Navigating a Post-Health Reform World: 4th edition (PDF, sign-in required)

Chapter 1: ACO Overview 

Chapter 1 (PDF) provides a history and definition of ACOs and reviews the benefits and challenges that physicians should consider prior to participation.

Generally speaking, an ACO is an organization of physicians and other health care providers held accountable for the overall quality and cost of care delivered to a defined population of traditional fee-for-service Medicare beneficiaries who are assigned by the Centers for Medicare and Medicaid Services (CMS) to an ACO. An ACO may also be privately funded by a health insurer or other payer.

The theory behind the ACO is that effective delivery of and coordination of care (and thus cost savings) is difficult to achieve without integration among the providers. Therefore, ACOs are incented, in the form of “shared savings” or payment methodology other than fee-for-service alone, to manage care in a manner that results in cost savings.

Chapter 2: ACO Governance Issues

Chapter 2 (PDF) reviews the key concepts of ACO governance and provides strategies to ensure that the rules established serve the best interest of participating physicians. It is imperative that physicians have confidence in the process used to govern the ACO if the ACO is to be successful. Physicians must believe that the ACO is being managed in a fair and transparent manner that takes their input into account, since the ACO’s decision will in many cases directly impact participating physicians, e.g., how physician quality and cost-effectiveness are judged and how financial rewards or penalties are allocated.

Chapter 3: Partnering With Hospitals

Chapter 3 (PDF) focuses on establishing a physician-hospital ACO partnership. In many cases, a hospital may ask a physician to partner with the hospital to create an ACO. There is no single approach to partnering with a hospital or hospital health system that is uniformly applicable or recommended.

Regardless of approach, there are key considerations that physicians should take into account in creating an ACO that participating physicians and the hospital will find mutually beneficial. This chapter discusses these key physician considerations and provides a detailed checklist to help physicians evaluate a hospital as a potential ACO partner.

Chapter 4: Partnering With Health Insurers

Chapter 4 (PDF) provides an overview of the potential benefits and challenges of establishing a physician-health insurer ACO relationship. Although historically some physicians may have found the business relationship with insurers challenging, physicians may find it advantageous to create an ACO through a partnership with a health insurer.

This chapter describes a number of potential advantages of partnering with a health insurer. For example, the health insurer may have financial resources that physicians lack, and the insurer may often possess a wealth of patient data that, if shared appropriately with ACO physician partners, may improve physicians’ ability to measure and improve the quality of the health care services they provide. 

This chapter also describes how decisions concerning the structure and operation of the ACO should be apportioned between physicians and the partnering insurer to ensure that participating physicians retain professional autonomy and independence concerning purely professional and clinical issues. 

Chapter 5: Earning EHR Incentive Payments

Chapter 5 (PDF) discusses some of the major concerns physicians have with acquiring EHR technology. It provides a brief, easy-to-understand summary of the Meaningful Use program’s current requirements, e.g., the program’s hardship exception for physicians.  The chapter also contains a discussion designed to help physicians identify key issues that often arise during the contracting process with EHR vendors.

Chapter 6: Managing Antitrust Risk

While the formation of ACOs is encouraged by the federal government, ACOs are required to comply with antitrust laws. The antitrust laws consist of a number of federal laws that prohibit a wide range of anticompetitive conduct. While these laws are expressed in very general terms, they are supplemented by a significant body of case law and by actions taken by the federal agencies responsible for the public enforcement of the antitrust laws.

Chapter 6 (PDF) provides an overview of the antitrust laws, their enforcement and how they apply to ACOs, including a general overview of the Sherman and Clayton Acts.

Chapter 7: Hospital Physician Employment Agreements

Hospitals continue their efforts to employ physicians. Chapter 7 (PDF) discusses key issues physicians should consider prior to entering into an employment agreement with a hospital. Physicians need to appreciate the key issues surrounding hospital employment so that they can spot (and avoid) pitfalls and negotiate a beneficial employment contract.

Chapter 8: Independence With Accountability

Chapter 8 (PDF) provides care coordination and integration strategies for small physician practices including detailed guidance describing how solo practitioners and physicians practicing in small groups can acquire the core capabilities necessary to succeed in new payment and delivery models. It explains the steps that physicians can take to improve health care quality, including how to standardize their practices, improve care coordination and use their practice data.

AMA Advocacy on ACOs

Consider the AMA an advocate on issues related to ACOs and other physician integration strategies. Search archived letters to learn more about AMA advocacy efforts on this topic.

Ask Questions

Please contact Wes Cleveland, JD, senior attorney, with any questions: [email protected].

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