Accountable Care Organizations – a Primer

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There is much in the Patient Protection and Affordable Care Act (PPACA) that is good.  Unfortunately, most of that is barely comprehensible to the average American.

One area in particular gets kudos from health care policy wonks.  The legislation describes numerous programs designed to encourage health care delivery reform and payment reform.

In the lingo of the tea party louts these are evil “pilot programs” designed merely to sprinkle government largess to purveyors of unproven ideas.

Over the next few weeks I will examine some of those ideas. Some are specifically mentioned in PPACA and others are models that hope to gain some traction from the law.

Accountable Care Organization

I want to start with accountable care organizations.  Not because the concept has any special appeal or primacy.  I simply like the name.

What is it about American health care that someone might think a label with the words “accountable” “care” and “organization” might have some novelty or some appeal?

Isn’t our health care system organized?

Isn’t it about “care”?

Isn’t it “accountable”?

In the profound words of Homer Simpson, “Hmmm”!

Accountable care virtual organziation

So what is it about accountable care organizations, ACOs to the cognoscenti, that differ from other parts of our health care apparatus that might be missing one or more of those words.

For starters, an accountable care organization is not an organization.  At best it is a virtual organization.

A recent article in the health policy journal, Health Affairs, offers this definition.

ACOs consist of providers who are jointly accountable for achieving measured quality improvements and reductions in the rate of spending growth.

An earlier Health Affairs article from 2006 offers a less expansive notion of the accountable care organization.

Accountable care organizations comprise local hospitals and the physicians who work within and around them.

The concept has both a practical and theoretical simplicity.

Doctors and hospitals don’t like to be held individually accountable for the results that they achieve or even for the money they might cost the system.

There is also the  mathematical reality that a single doctor may not treat enough patients in a single category to reliably measure their performance.

We will ignore the fact that they also resist efforts to organize themselves into coherent systems.

So policy and data geeks create a virtual herd of cats and notice that doctors grouped around a primary hospital reflect the pattern observed at the hospital.  In other words, if inpatient performance is better, so is the quality of ambulatory care among those physicians associated with that hospital.

The story in pictures

The following two graphs tell the story.  The data was taken from the 2006 Health Affairs article by Fisher, et.al.  The study first grouped physicians and patients around their primary hospitals.  What it revealed is that when the hospital performed well, the physicians and physician practices affiliated with that hospital or hospitals also performed well.

The researchers grouped hospitals and physicians into groupings based on performance measures of the hospital.  The best performing hospital quintile is on the left and the lowest performing quintile is on the right.

The first graph shows that total costs – both inpatient and outpatient are lowest for those patients associated with the best performing hospitals and that the costs increase as performance decreases.

The second graph looks at very specific ambulatory care process measures for those patients associated with the hospitals in each quintile.   Again ambulatory care quality tracks inpatient care quality.

What next?

It is one thing to observe a pattern, to find the bright spots.  It is quite another to replicate those experiences elsewhere.  That’s why the PPACA does not attempt a one size fits all solution.  Instead they want to stir the pot.  Try out different fixes to see what can be learned that can be replicated by others.  Unfortunately, they do not have much time according to former CMS Administrator, Mark McClellen.

In future posts I will try to identify some of those high performing areas and some of the challenges of transforming the delivery system in the lower performing areas.

One particular challenge is highlighted in both the studies I mention here.  It is described in the most recent Health Affairs article as the “legal and regulatory issues surrounding provider coordination and engagement with multiple payers.”

To distill that into the words I have repeated often in this space; reform of the care delivery system cannot occur before reform of the patient delivery system.

But we can try anyway.