Accountable Care Organizations Featured in Both Health Reform Bills

Janice Simmons, for HealthLeaders Media , January 25, 2010

Since early last year, accountable care organizations (ACOs) have caught the attention of policymakers on Capitol Hill as a different way to deliver and pay for healthcare at the local level under current reform legislation.

Under the House bill approved in November (HR 3962), provisions are included that call for incentive payment for pilots encouraging ACOs in both Medicare and Medicaid beginning in 2012. The Senate health reform bill allows for providers organized as ACOs that voluntarily meet quality thresholds to share in the cost savings they achieve for the Medicare program. These shared savings programs also must have "adequate" participation of primary care physicians, and would also start in 2012.

ACOs are one response to concerns over the fragmented nature of healthcare delivery across the United States, according to a new brief from Mathematica. Organized delivery systems that involve multispecialty physician practices linked to other components of healthcare can "provide cohesion, scale, and affiliation, leading to enhanced quality of care and efficiency," notes author Marsha Gold, a senior fellow at Mathematica in Washington, DC.

Both bills are "envisioning something that builds on fee-for-service in these models," Gold says. Massachusetts also is proposing to create incentives for provider integration as part of its state’s health reform efforts, but it is emphasizing more fundamental provider payment reforms—such as global payment, she adds.

Although various types of ACOs have been proposed, they all share two essential features, Gold says:

  • Designated accountable provider entities. ACOs are collectives that will share responsibility for treating a group of patients. Although some qualifying entities may already exist, many will have to be created. Entities may form voluntarily, with providers taking advantage of existing structures. Under some proposals, "virtual organizations" may be created, with patients identified from claims analysis—showing patient referral relationships among local physicians, hospitals, and other providers.
  • Performance measurement and new payment approaches. Common ACO proposals will call for part of each provider’s payments to be based on care the ACO as a whole provides to its patients. In most proposals, these payments will supplement existing fee for service payments. Supplemental payments, such as "shared savings," will be provided retrospectively to the extent that an entity meets goals related to quality or cost.

"Small incentives don't necessarily yield results, but I think the intention is to organizationally encourage an infrastructure by which people think of themselves more as sharing responsibility for a set of patients—and then realign the financial incentives so that they address that," she says.

Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at

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