ACO 101: Clearing Up the Misperceptions

ACO 101: Clearing Up the Misperceptions
Market Forces

Article highlights:

  • ACOs have the potential to deliver better care coordination, reduce healthcare costs, and improve patient outcomes
  • It is vital that all laboratorians understand the fundamentals of how ACOs work and what role the lab plays                       
  • Meaningful communication of lab data is an essential component for delivering integrated care across ACO networks

Are you confused about Accountable Care Organizations (ACOs)? What they are? How they work? What role the laboratory plays in them?

If so, you’re not alone. The rapid growth of ACOs since 2011 has left many laboratorians with more questions than answers about this new model of healthcare.

But don’t worry: American Association for Clinical Chemistry (AACC) and LabLeaders brought together a team of expert physicians, payers, and lab directors to explain ACOs and the opportunities and challenges they present. They answered fundamental questions that will help ground you in a solid understanding of accountable care and what it means to your lab.

What is an ACO?


An ACO is a group of healthcare professionals (HCPs) that delivers coordinated care to Medicare patients in order to improve quality and reduce costs.

HCPs who come together to form an ACO include hospital physicians, home healthcare workers, private-practice physicians, insurance companies, and, of course, laboratorians.

As a team, these HCPs take collective responsibility for a patient through the entire continuum of his or her care. The goal is to provide longitudinal care (as opposed to episodic care, or seeing patients only when there is a medical issue) that keeps patients healthy, at home and out of the hospital as long as possible.

Les Duncan

Director of Accountable Care Solutions

Highmark Health

How do ACOs work?


Patients in an ACO can see any physician or visit any healthcare facility they want, whether or not it’s part of the ACO. In this respect, ACOs are vastly different than Healthcare Maintenance Organizations (HMOs). Patients are often incentivized to visit HCPs who participate in the ACO, but are not required to do so.

However, all participating HCPs and organizations are collectively accountable for the patient’s well-being, regardless of where the patient goes for care. For many ACOs, that responsibility extends to tens of thousands of patients.

Keeping track of where these patients receive care is essential to the process. Here’s how Medicare helps:

  • Medicare assigns patients to the ACO using tax identification numbers
  • Patients submit claims against those numbers
  • Patient tax identification numbers are submitted to the Centers for Medicare & Medicaid Services (CMS)
  • CMS reports claims data to the ACO for patients who have been billed using those tax identification numbers

Les Duncan

Director of Accountable Care Solutions

Highmark Health

Why join an ACO?


There are many reasons for labs, hospitals, physicians and other HCPs to join ACOs. Perhaps most importantly, it’s a way of doing one’s part to ensure that Medicare is there for all of us—and all of our children and children’s children—when it’s needed.

ACOs can also facilitate better management of population health within a structure that brings together multiple healthcare disciplines, consolidates patient data and encourages proactive interventions to prevent health problems.

Importantly, Medicare has stated a goal of moving 80% to 90% of medical payments to an “at risk” classification by 2020. This means that Medicare benchmarks a specific dollar amount to an ACO for annual patient care, based on a variety of factors. If an ACO is able to meet quality measures for care below that benchmark, the ACO may keep the cost difference. This is called shared savings.

The “at risk” classification is used if the ACO exceeds the dollar amount or fails to meet quality standards. In such cases, the ACO will be penalized financially.

Joel Shu, MD, MBA

Chief Medical Officer & Chief Quality Officer

Emory Healthcare Network

How do ACOs control costs?


Care is coordinated and costs are controlled through risk stratification. An ACO’s overall patient population is stratified into the three broad categories below.

To convey a sense of the number of patients in each category and the costs associated with their care, Les Duncan offers examples from his own experience at the River Health ACO in Harrisburg, PA. See each category below to learn more about the patient population and how ACOs work to optimize their care.

What benefits do ACOs offer beyond shared savings?


Patients in an ACO can see any physician or visit any healthcare facility Generating shared savings is not easy. In fact, many ACOs today struggle with it. That’s not surprising when you consider that the ACO model is relatively new. Growing pains are to be expected.

But there are immense benefits beyond shared savings. An important one is having a clinically integrated network: a connected chain of HCPs and organizations driving new volume. Patient referrals, shared data, treatment protocols and consistent quality measures are a few examples of how clinically integrated networks can raise the bar for all players in the ACO.

This can translate into stronger partnerships and better contracts with payers as integrated networks demonstrate greater coordination of care and cost control. Richard Gentleman, Head of National Ancillary Contracts at Aetna, says:

“That’s who we’re looking to align with. We want to see the infrastructure and the financial strength to support the risk as well. We have got to make sure we are aligned in where we want to go.”

Payers also facilitate integration through programs that incentivize patients to seek all their care within the ACO, driving up volume.

What are the challenges of creating a clinically integrated network?


Integrating a clinical network that delivers cost-efficient quality comes with challenges, to be sure. HCPs and payers continue to pursue creative solutions for issues that include:

  • Ensuring consistent quality among network physicians
  • Delivering comprehensive medical services within the network
  • Linking electronic medical records (EMRs) across the network
  • Encouraging competitive organizations to work cooperatively
  • Coordinating care through open and consistent communication

Patterns of patient care need to change substantially to achieve true clinical integration. Treating in care silos where physicians, labs and institutions provide limited communication is rapidly becoming outdated. Sharing data, volume, protocols and quality measures will lead to the ultimate prize: shared savings and success.

Richard Gentleman

Network Market Head


What is most essential to delivering coordinated care?


In an ACO, nothing is more important than communicating meaningful patient data to PCPs. Think of the PCP as the quarterback of a patient’s extended care team. They own the patient relationship, direct care and make key decisions. When data flow to PCPs in a timely manner, they are better equipped to manage care toward the best outcomes.

But the data have to be meaningful. Systems can’t just dump data on PCPs. In the case of lab data, for instance, PCPs may repeat tests if they receive a heavy volume of disparate data from multiple labs. How can they trust the data? They’ll just order new tests themselves, from a lab they know. This drives up costs and adds confusion.

Because of the volume and variety of data out there, there are many aggregators and other companies that work with labs, physicians, and institutions within ACOs to format data appropriately, provide analytics, and deliver actionable results.

Sources of data include claims, prescriptions, lab results, and more. Why are these data so essential? Because of the broad spectrum of uses ACOs have for them, including:

  • Identifying patients who require medical interventions
  • Tracking quality measures in patient populations
  • Reporting outcomes to CMS
  • Identifying patients that CMS should be reimbursing ACOs for

How can ACOs help ensure healthy outcomes?


As we said at the outset, the ultimate goal of ACOs and at-risk models is to improve health outcomes for patient populations. ACO performance is measured in part against metrics such as rehospitalization rates, inpatient treatment duration and control of lab values in at-risk populations.

An emerging strategy for ensuring healthy outcomes is holding patients as accountable as the HCPs who treat them. Take a patient with diabetes as an example. His ACO might work to educate him about the importance of glycemic control. A smartphone app might help track his daily fasting plasma glucose, deliver lifestyle tips and remind him when it’s time to get his A1C tested again.

Beyond this, financial incentives tied to outcomes can be provided to the patient as well. Payers might offer premium relief if this patient is at or close to his A1C goal. Depending on the dollar amount of that relief, the potential is there to encourage greater engagement in his own health—a win-win for all concerned.

How can I learn more about ACOs?


We’ve only just begun to scratch the surface of this vast and timely topic. In the coming weeks, LabLeaders will cover other aspects of ACOs in even greater depth. This introduction should provide you with a foundation on which to build your understanding of ACOs and take action to decide if participating in one is right for your lab.

Contributing Lab Leaders

Les Duncan

Director of Accountable Care Solutions

Highmark Health

Joel Shu, MD, MBA

Chief Medical Officer & Chief Quality Officer

Emory Healthcare Network

Richard Gentleman

Network Market Head


Jason Bhan, MD

Chief Medical Officer


Michael Astion

Division Chief of Laboratory Medicine, Clinical Professor of Laboratory Medicine

Seattle Children's Hospital

Peter Gross

Chair, ACO Board of Managers

HackensackAlliance ACO

Patti Jones

Clinical Director, Chemistry

Children's Medical Center Dallas


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