Half of hospitals will join ACO in 2014

healthcareBIZMOLOGY — Hospitals are increasingly joining Accountable Care Organizations (ACOs), the latest attempt to curtail rising healthcare costs in the US. By the end of 2014, Premier’s 2013 Economic Outlook C-suite survey predicts that hospital ACO participation will double.

ACOs are networks of hospitals, physicians, and other providers that coordinate patient care. Ideally, this coordination improves patient outcomes and cuts costs by eliminating unnecessary tests and reducing hospital readmissions. ACOs are reimbursed by Medicare or private insurers, with the fee amount split between the network providers.

Adoption of ACOs has moved slower than many anticipated, but continues to grow. About 18 percent of hospital executives surveyed by Premier participated in an ACO in fall 2013, 4.8 percent more than in spring 2012. Premier’s Economic Outlook C-suite survey predicts that about 23.5 percent of hospitals will create or join an ACO by the end of 2013. Participation is expected to be near 50 percent by the end of 2014.

Hospitals and providers generally agree that coordinated care is best for patients. However, joining or creating an ACO is risky. The payment system is different from the fee-for-service model. ACOs receive reimbursement for a patient’s episode of care, such as a heart attack. Then the provider running the ACO must decide how to divide the payment fairly between the hospital, family practitioner, cardiologist, and other providers. (Read this previous Bizmology post about the benefits and challenges of bundled care payments.) Most ACO models are currently using the upside-only shared savings model, which does not penalize the ACO for failing to improve patient outcomes or cut costs.

Setting up an ACO is also complicated. Due to the large technological and staffing investment needed to create an ACO, most are run by large, non-rural hospitals. Stand-alone and rural hospitals are less likely to create or join an ACO.

Along with these challenges, the evidence of cost savings of ACOs is still being compiled as the model matures. Some organizations may be holding off until these partnerships are more established and the model for savings is clearer.

Still, the patient-focused component is taking off, even for those providers not part of an ACO. According to Premier’s survey, hospitals are increasingly hiring lifestyle and wellness coaches to focus on whole patient care. Almost half of rural hospitals surveyed use telemedicine to better serve clients. Patient-centered medical homes are also growing in popularity. Premier predicts that this patient-centered approach will lay the groundwork for more transitions to ACOs, with continued growth into 2015.

To learn more about the $2 trillion healthcare sector, including hospitals and physician practices, visit Hoover’s or First Research.

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Photo by Army Medicine, used under a Creative Commons license.

Rebecca Mallett

Rebecca Mallett has been researching and writing about companies, industries, and executives as a member of the Hoover’s editorial team since 2007. For the past 5 years, she has focused on the agriculture and food manufacturing, business services, and mining and energy industries as a member of the First Research team. Follow her on Twitter.

Read more articles by Rebecca Mallett.

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