Accountable care organizations: Extending the techniques nationwide

by Greger Vigen, FSA

Given rising health costs and continuing uneven quality, major players in the health care industry (hospitals, physician groups, insurance companies and professionals like actuaries) are spending significant energy to develop solutions.  These changes are happening at the federal level with Medicare, at the state level with Medicaid, and in private sector initiatives with insured and self-funded employer programs.  Many of these programs are called Accountable Care Organizations or Patient-Centered Medical Homes.  There are hundreds of these initiatives currently underway across the country.

The core concept, providers who are accountable for cost and quality, is potentially very powerful.  And key elements of the concept have already been effective in a few locations.  However, there is a lot of work to be done to extend the underlying techniques nationwide.   Pilots in many new locations are already underway.  In early results, many pilots have been successfully improving measurable quality and have been willing to share how they achieved results.  But only some pilots have produced financial results and improved affordability through reduced waste.

The leaders are using a range of improved tools and financial expertise to bend the cost trend and meet financial targets.  Patients need to be identified and supportedKey financial and clinical data must be shared between partners. Financial reports must be created to identify potential waste and set priorities.  Financial controls to manage uncontrollable illnesses must also be created.  Part of the good news is that many new tools are now available: improved episode metrics offer analytic tools that are useful to physicians, and new payment models have been developed to align financial incentives to providers, including reducing complications, lowering readmission rates, bundling payments and reducing admissions for ambulatory sensitive care.

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