ACOs are Here to Stay, Even if the ACA is Not

Jun 01, 2012
By Pharmaceutical Executive Editors

The US Affordable Care Act may not stand in its current form, but one element of it will continue to be an important trend in US healthcare—accountable care organizations (ACOs). ACOs have gained greater visibility because of their inclusion as part of a CMS Medicare initiative in the law. However, private insurance companies have been actively pursuing ACOs independent of any governmental mandate. Because ACOs are being pursued by both government and private payers, it is a trend that will have staying power independent of the legal fate of the healthcare law. It is also a trend that could have significant pricing and marketing implications for pharmaceutical and medical device companies selling products in the United States.

The ACO concept

The ACO model aims to improve quality of patient care while containing overall cost. Private or government insurers enter into contracts with healthcare provider networks (the ACOs) to deliver care for a given patient group at a fixed budget, while still delivering quality care as measured by a number of performance metrics. These arrangements include some kind of shared risk (or gain) between the insurer and the ACO for meeting an agreed-upon budget that covers the entire care for the defined population of patients. Quite simply, if the ACO can manage to squeeze efficiencies and stay under the contractual budget then they stand to make a profit. If the ACO exceeds the annual budget (depending on the contract) they may be liable for paying a portion of the budget overrun.

While some may perceive ACOs to be an initiative driven by CMS, the truth is actually more nuanced. It is true that some of the first ACOs were pilot programs introduced by CMS, such as the Physician Group Practice Demonstration (introduced in 2005). However, in recent years private insurers have taken this idea and made it their own. In fact, the authors at CMS who wrote the ACO guidelines under the Affordable Care Act had to alter their final rules (issued in October 2011) after existing ACOs complained that the quality metrics were too different from those already in use as part of private managed care organization (MCO) agreements. So while CMS may have started the ACO trend, they are no longer the sole driver of development.

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