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Accountable Care Organization (ACO): The New Paradigm in Providing Healthcare

Though the buzz in the Healthcare Industry in the United States is around 'meaningful use' as a provision under the HITECH Act, most Healthcare providers are grappling with another situation – how to provide adequate care while keeping costs under check?
Often in my experience I have seen that Healthcare costs have been driven up by treatments and procedures that were not really necessary but were followed more out of process. This always led to increase in overheads and reduced margins for the providers. Accountable care is a system by which there is an increased emphasis on efficiency and mapping costs to results.

In 2009, the Medicare Payment Advisory Council recognized the Accountable Care Organization as a model to restructure Medicare Cost. In a recent report, non-IT executives recognized Accountable care as the top priority for their Healthcare system.

So how does the Accountable Care Organization (ACO) model work?

An Accountable Care Organization is actually a structure dedicated to quality and efficiency in medical practice, reporting and compensation standards across a group of physicians or a hospital for the patient community. The advantages of this system include an integrated healthcare environment across the provider backed by efficiency and transparency. The objective would be to measure healthcare organizations based on outcomes rather than the process. This would also ensure that the costs are controlled and money spent on activities that actually promote patient welfare.

With the coming in of the Patient Protection and Affordable Care Act (PPACA), there would be a move to create Health Insurance Exchanges. This would directly affect the costs of the providers as lesser number of the uninsured would be walking in to the Emergency Services (ER) of the providers. Most providers are not able to provision for this cost and hence the resulting overhead. As the costs linked to insurance can be calculated, it will help providers plan their budgets in a more efficient manner. The Patient Protection and Affordable Care Act also provides for implementation of the Medicare Shared Savings Program by January 1, 2012, with multi-year ACO agreements spanning three to five years.

In a 2008 article that was published in the Hindu Business Line, I had advocated the use of Physician Ratings by providers to ensure that there was a framework of operational efficiency inbuilt in the system.

Today two years later, the move to make Healthcare organizations more efficient is a reality.
Despite all the advantages, this move is not without challenges. Currently the creation of ACOs is voluntary and one has to agree to be in this program for at least three years to qualify as an ACO. There are still a lot of questions unanswered as to the qualifying criteria for an ACO, the interactions with state insurance regulations and the payment methodology, but still the thought of an Accountable Care Provider (ACO) is a step in the right direction.

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Comments (5)

Engagement Rings - May 24th, 2011

I understood your words such as accountable Care Organization is actually a structure dedicated to quality and efficiency in medical practice, reporting and compensation standards across a group of physicians or a hospital for the patient community

Dr Vikram Venkateswaran - November 25th, 2010

Hi, Thank you for showing interest in the blog, an ACO would definitely need analytics solutions to figure out if the procedure was required and what were the clinical outcomes. If the outcomes were not favorable, then probably the procedures would have to be reviewed. An ACO has a single point agenda i.e. to ensure that there is transparency both to the stakeholders and the patients on clinical procedures and outcomes. Currently, Wipro does have solutions on Hospital Quality Analytics which can be utilized. APAC, Middle East and Africa still have some way to go in order to be in the position to implement ACO solutions. But that will happen sooner than later, considering the growth in these markets.

Dr Vikram Venkateswaran - November 25th, 2010

Hi Jeevan, Thank you for showing interest in the blog. I agree that in the short term the costs are bound to go up. But eventually, the transparency in the system will help reduce costs. The opposition from the medical fraternity is natural, but I think all stakeholders involved, the government, healthcare administrators, physicians etc. would have to launch educational programs and help train all involved in the new system. To be part of the accountable care, one has to sign up for at least five years, which will help educate them all.

jeevan mathai - November 20th, 2010

Hi Vikram, I found your article very interesting. However will the ACO system actually help reduce costs for treatment? I seriously doubt. It can at best bring about some level of transparency in the treatment protocol. Also, will it also not require years of research to be accepted by the medical fraternity.

Archana Venkat - November 18th, 2010

From an operational/transactional point of view. do ACOs reduce the burden on conventional healthcare providers? Also, what kind of IT solutions would ACOs need? Considering the fast adoption of the ACO model, it would be a good idea to perhaps do a joint study or tweak some of Wipro’s offerings to customise them to target this market. Also, would you know how prevalent the ACO model is in APAC, Middle East and Africa?

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