Health Care Quality and Value: The (R)evolution of the ACO

By Stephen C. Spain, MD, FAAFP, CPC
Angela “Annie” Boynton, BS, CPC, CPC-H, CPC-P, CPC-I, RHIT, CCS, CCS-P, CPhT

Part 2: As health care moves away from fee-for-service, quality care comes to the forefront.

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Evidence-based medicine (EBM) and the Physician Quality Reporting System (PQRS) have brought the concept of pay for performance (P4P) to health care. The (r)evolutionary next step driving quality and value is the accountable care organization (ACO). The concept of accountable care begins where P4P ends: More than offering incentives for quality care, it requires quality care as a condition of reimbursement.

ACOs 101

In October 2011, the U.S. Department of Health & Human Services (HHS) released a final rule governing the formation of ACOs. ACOs were implemented as a voluntary program in January 2012 as a result of the Affordable Care Act (ACA) and a modification to the Social Security Act (SSA), which established a funding source known as the Shared Savings Program. The ACO provisions represented only seven pages of the massive ACA; however, they were one of its most publicized provisions (along with the individual mandate).

Through the Shared Savings Program, the ACO initiative creates incentives for health care providers to work together to treat an individual patient across care settings, including physician offices, hospitals, and long-term care facilities.

Payers can form ACOs, and many have. UnitedHealthcare, Aetna, and Humana—each of which has vast experience with performance-driven care outcomes—have all formed ACOs. There are both commercial and Medicare ACOs. Many ACOs have been established by community-based programs and provider groups.

ACOs Require Performance Measure Reporting

ACOs seek to reduce health care costs, coordinate care, eliminate duplication of care, and prevent medical errors while ensuring better data integrity. ACOs meeting specific performance objectives over a three-year introductory period will share in any savings they create through lowered health care costs (versus estimated costs using a “traditional care” model). ACOs unable to meet the performance objectives will be penalized. The goal is to share in rewards and risk across all participants in the ACO.

Like PQRS and other quality monitoring programs, ACOs rely on data—much of which will be derived from patient charts by certified medical coders. The final rule adopts 33 individual measures of quality performance used to determine if an ACO qualifies for incentive shared savings. These performance measures span four quality domains:

  • Patient Experience of Care
  • Care Coordination/Patient Safety
  • Preventive Health
  • At-risk Populations

Reporting conditions such as chronic obstructive pulmonary disease (COPD), congestive heart failure (CHF), coronary artery disease (CAD), vascular disease, risk for falls, diabetes, hypertension, tobacco cessation, depression, certain types of cancers, and immunizations all will depend on data provided by certified medical coders, and will help to determine if the ACO will share in savings or face penalties.

Moving Away from Fee-for-service

As a reimbursement methodology, ACOs are vastly different from traditional fee-for-service (FFS), which is the most common reimbursement methodology in the United States. In an FFS system, providers are paid based on the number of tests, treatments, surgeries, or studies they perform; hospitals are paid based on the number of beds they have occupied. The focus is on “how much” (quantity) care is provided, rather than “how good” (quality) the care is.

The concept of quality-based reimbursement (such as P4P) has existed for approximately 25 years, but has only begun to pick up steam in the past 10 years with the advent of the physician quality reimbursement initiative (now PQRS). If successful, the ACO model will revolutionize the way we receive, and pay for, health care in the United States.

ACO: HMO Take 2?

There are many differences between standard health maintenance organization (HMO) models and ACOs. When the Health Maintenance Organization Act of 1973 was passed and pioneered managed care, Americans were hesitant to allow Big Brother to oversee health care. It took nearly a decade for the managed care concept to catch on, but when it did, we learned that managing care saves money. There were, however, drawbacks in the way HMOs governed access to care. For example, HMOs are insurer driven and care can be fragmented; there is often little collaboration or cooperation in care delivery. There are gatekeepers—usually a provider that controls a patient’s access to higher levels of care (which raises the often worrisome in-network versus out-of-network dilemma)—and the overall focus of HMOs and managed care remains on quantity rather than quality.

Unlike the HMO or managed care model, the ACO model is provider driven. Care is intended to be fully integrated and should occur more collaboratively. Team-based care is a primary tenet of the ACO. There are no gatekeepers in ACOs, and the overall focus is on the quality and efficiency of care. Rather than being incentivized to deny expensive care, the ACO receives incentives for higher quality outcomes.

There are risks associated with the ACO model. Early participants in ACOs are not fully weaned from of the FFS system, so ACOs remain an unproven reimbursement system. We are not likely to see quality-based outcome measures or quality-based financial incentives for a year or more.

Another potential danger is ACOs will engage in “cherry picking,” or choosing only the healthiest patients to treat. The Centers for Medicare & Medicaid Services (CMS) has announced they will penalize any ACO caught cherry picking, and there are protections built into the final rule so cherry picking ACOs stand to lose money. Concerns remain that this may not be enough to combat the problem.

Perhaps the greatest risk is that there are no gatekeepers: There is nothing requiring a patient to remain with an ACO. In other words, if a patient wants to obtain health care from providers outside the ACO, he or she may do so using traditional Medicare insurance. The ACO would be penalized for these out-of-network expenditures (presumably, if the ACO’s quality of care and patient satisfaction are high enough, there would be no reason for a patient to seek health care elsewhere). This patient freedom represents a big gamble for fledgling ACOs.

The United States has yet to design a perfect health care system. If ACOs are to be successful, they must have a solid foundation with which to bridge the divide between FFS and accountable care.

Stephen Spain, MD, FAAFP, CPC, has been engaged in the full-time practice of family medicine for over 25 years. In 1998, he founded Doc-U-Chart, a practice management consulting firm specializing in medical documentation. Dr. Spain can be reached at

Annie Boynton, BS, CPC, CPC-H, CPC-P, CPC-I, RHIT, CCS, CCS-P, CPhT, is the director of 5010/ICD-10 communication, adoption and training for UnitedHealth Group. She is an adjunct faculty member at Massachusetts Bay Community College, and a developer and member of the AAPC’s ICD-10 training team. Ms. Boynton frequently speaks and writes about coding matters, including ICD-10 and 5010 implementation.


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