The Impact of ACOs on the Bundled Payment Program

ID-100231194On January 30th, the Centers for Medicare and Medicaid Services (CMS) released financial figures which showed savings of approximately $380 million.  These savings, according to HHS secretary Kathleen Sebelius, could be directly attributed to various Accountable Care Act and Bundled Payment initiatives.

The results included interim financial analyses for Pioneer Accountable Care Organizations (ACOs), selected Medicare ACOs and results from the Physician Group demonstration as well as increased participation in the Bundled Payment program.

What are ACOs?

Accountable Care Organizations are groups of healthcare providers who agree to provide care services to a defined population of patients.  ACOs are special in that they take on a shared responsibility to manage both costs and quality of the care provided. Basically, ACOs comprise hospitals, specialists, primary care providers, and patients.

There are clear signs that payment will be shifting from the traditional fee for service (FFS) formula to a value based formula.  Success in the future will depend on a provider’s ability to manage and monitor efficiency and quality.  Private care providers must therefore work to achieve care coordination, team care, patient registry efficiencies, and health information technology.

The whole idea of ACOs is to control or reverse the increasing cost trends in healthcare. This is to be achieved through what is known as “shared saving.”  Shared savings simply means that when a group of providers work together, it is possible for them to deliver care of equal or better quality while cutting on costs to levels below current projections.  At the end of the day, there should be savings that can then be shared among the providers and the payers (including the government and employers).  The formula for sharing that saving should be negotiated and specified in the contact between the involved parties.

Bundled Payment

Bundled-Payment is very different from ACOs, primarily focusing on reducing cost by reducing or eliminating existing legal barriers to sharing cost savings with private practitioners.  ACOs are primarily concerned with providing care for the population.

The coexistence of ACOs and Bundled Payment: Can the two initiatives beneficially coexist?

Although the focuses of the two programs are very different, policy makers will be hoping that the two can work in harmony to help provide better healthcare to the masses while minimizing costs.

ACOs shouldn’t be confused with the HMO care and capitation models that we saw in the 1990s. While the two are similar in a number of ways, there are significant differences between them.  The first major difference comes in form of the increased need for information technology and performance measuring for ACOs.  Current measuring metrics allow for better measuring of quality.  When ACOs receive payment for services offered to a defined population, such payment is more or less capitated payment.  Secondly, there is also a big difference between insurance risk and performance risk.

Some have argued that building Bundled Payment services can be used as a stepping stone for ACO development.  In any case, both are geared towards readmission reduction, lowered cost and overutilization of services, and improve the quality of care. ACO and Bundled Payment programs should not be treated as mutually exclusive choices – because they aren’t.  CMS hasn’t created a situation where participating in of these initiatives prohibits you from participating in the other.  Each comes with its own benefits and physicians are encouraged to consider their options.  You can decide to work exclusively with Medicare’s ACO, or you can decide to go the route of Bundled Payment.  Or you can decide to participate in both – to your advantage.

 

 

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