Journal of Medicine - Health care providers are embracing accountable care organizations, a key part of last year's health care law, as they try to control rising Medicare and health care costs.

Accountable care organizations are networks of doctors and hospitals that band together to better coordinate patient care by using computerized medical records and increased analysis of various treatments. Instead of the current system in which a patient sees a variety of doctors with little coordination, this new system is meant to eliminate duplication and provide financial incentives for providers to improve quality while also cutting costs.

Hospital administrators and health care experts across the country say they're creating the organizations, despite concerns about federal rules, because they realize they are the only way to remain profitable as a large portion of the nation's population moves toward old age.

Between 60 and 80 health care organizations use private accountable care models now, and that number will rise by at least 100 next year as the Medicare pilot program begins, said Elliott Fisher, director of Dartmouth's Center for Health Policy Research. That number will exceed 200 in 2013 and hit between 500 and 1,000 such organizations within three years, he said. Of the five organizations in a pilot program run by Dartmouth and the Brookings Institute, a Washington think tank, only one was active in 2008.

If hospitals can save money by reducing hospital admissions and helping their patients avoid crisis situations or by not paying twice for the same test, they get to keep the extra cash paid by either insurance companies or Medicare. In the case of Medicare's new Accountable Care Organizations, they would keep a portion of the savings based on what Medicare would expect to pay that provider without an ACO. But if Medicare loses money, so does the provider, so businesses that go in on the ACO pilot must accept some risk.

"There's broad agreement that the trajectory of the U.S. health care system is unsustainable," Fisher said. "I think that almost every provider group, every physician, recognizes that change is coming."

'Payoff is better'

While some health care companies disliked the groups at first, financial concerns are driving them to create them, said Chas Roades, chief research officer for The Advisory Board Company, which works with 3,000 hospitals. "What we've picked up is there are things that require us to do it whether or not there's a law."

"It's a risk, but the payoff is better," said Judith Rich, president of TMC Healthcare in Arizona, which intends to participate in Medicare's pilot accountable care organizations that start in January. "It's like the stock market."

But accountable care also ensures providers don't cut corners — for example, decide not to do a particular test to save money — by including quality measures, such as low infection rates or not readmitting patients within 30 days of a prior hospitalization.

Not everyone is enamored of the organizations. The American Hospital Association says the government has low-balled the costs of starting a group. Health care companies have also criticized the first round of regulations issued by the Centers for Medicare and Medicaid Services.

"I believe the regulations are onerous and that there are a lot of questions still," said Ruth Brinkley, president of Carondelet Health Network in Tucson. "We're not prepared organizationally or logistically to do it right now."

However, she said Carondelet is moving away from a fee-for-service plan and toward a risk-sharing plan, and she said she expects to eventually take part in Medicare's ACOs.

Mayo Clinic, a leader in accountable care, will not take part in the pilot program. Patricia Simmons, medical director of government relations at Mayo, said the clinic is too far ahead of the game to benefit from the Medicare plan, though she supports it in general. "If you're already a high-quality, low-cost facility, it's really hard to move up," she said. "So what's the incentive? If you have less quality, you've got a great opportunity."

These things might seem obvious, but hospitals have had no incentive to change because pay-for-procedure has paid well in the past, Roades said.

Collaboration's value

As patients age, they develop a host of conditions that require treatment from different physicians. One doctor can no longer do everything, Fisher said, and if the team of doctors does not work together, that can fragment care. "For an individual with one problem, it may not be an issue," he said, "but for patients with several chronic issues, it's a disaster."

Often, physicians working at the same hospital may treat a condition in different ways, says Carle Falk, vice president of Crimson, a data consulting group for hospitals. Improved research and coordination, she said, will help determine if a less-expensive method may actually be the most effective. Her organization has collected data from 450 hospitals.

But some providers have complained that the new rules don't go far enough to push organizations to change to address the health care crisis, as well as the wave of incoming Baby Boomers.

"The disappointment is that this isn't going to get me there quickly enough," Roades said, paraphrasing the providers he works with. "If you eliminate the weird economic incentive not to fix it and put me fully at risk, I'll figure out how to make it happen."


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