New ACO Models Emerging in Long-Term Care

More At-Risk Scenarios Reward Efficiency, Safety, Quality

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The piggy bank gets bigger when providers effectively join together in risk-reward scenarios. Getty Images

An accountable care organization (ACO) is a group of health care providers who give coordinated care, chronic disease management, and thereby improve the quality of care patients get. The organization's payment is tied to achieving health care quality goals and outcomes that result in cost savings.

Accountable care organizations started as large physician practices and have evolved to include:

Integrated Delivery Systems
A common ownership of entities that may include an insurance plan.

Kaiser Permanente is one example.

Multispecialty Group Practices
Group practices that own or have a strong affiliation with a hospital. Mayo Clinic and Cleveland Clinic are two examples. They have a long history of physician leadership and sophisticated delivery systems.

Physician-Hospital Organizations
These organizations are a subset of the hospital’s medical staff. Some function like multispecialty group practices, focusing on reorganizing the delivery of care.

Independent Practice Associations
Independent practice associations consist of individual physician practices that come together to gain clout for contracting purposes.

Virtual Physician Organizations
Rural physician practices organized as “virtual” physician organizations. Community Care of North Carolina is one example.

ACOs Moving into Long-Term Care

Skilled nursing facilities have been typical ACO partners working with hospitals to rehabilitate patients and prevent readmissions.

But affiliations have often been informal and when partnered in an ACO have still been structured in a fee for service model. That is changing.

The Department of Health and Human Services has announced what they call the Next Generation Accountable Care Organization (ACO) Model of payment and care delivery.

“The Next Generation ACO Model is one of many innovative payment and care delivery models created under the Affordable Care Act, and is an important step towards advancing models of care that reward value over volume in care delivery,” said HHS Secretary Sylvia M. Burwell in a press release. “This model is part of our larger effort to set clear, measurable goals and a timeline to move the Medicare program -- and the health care system at large -- toward paying providers based on the quality, rather than the quantity of care they give patients.”

The new model sets predictable financial targets, enables providers and beneficiaries greater opportunities to coordinate care, and aims to attain the highest quality standards of care. That in turn requires taking on greater risk with greater reward potential.

In turn the Centers for Medicare and Medicaid Services Innovation Center says that the new ACO Model includes "rewards to beneficiaries for receiving their care from physicians and professionals participating in their ACOs, coverage of skilled nursing care without prior hospitalization, and modifications to expand the coverage of telehealth and post-discharge home services to support coordinated care at home." It will allow beneficiaries to confirm a care relationship with ACO providers and to communicate directly with their providers about their care preferences.

Bundled Payments

It would be foreseeable that bundled payments will be part of this new model.

Traditionally, Medicare makes separate payments to providers for each of the individual services they furnish to beneficiaries for a single illness or course of treatment. This approach can result in fragmented care with minimal coordination across providers and health care settings. Payment rewards the quantity of services offered by providers rather than the quality of care furnished. Research has shown that bundled payments can align incentives for providers – hospitals, post-acute care providers, physicians, and other practitioners– allowing them to work closely together across all specialties and settings.

Four Models

The Bundled Payments initiative is comprised of four broadly defined models of care, which link payments for multiple services beneficiaries receive during an episode of care. Model 1 includes an episode of care focused on the acute care inpatient hospitalization. Awardees agree to provide a standard discount to Medicare from the usual Part A hospital inpatient payments based on the payment rates established under the Inpatient Prospective Payment System used in the original Medicare program.

Models 2 and 3 involve a retrospective bundled payment arrangement where actual expenditures are reconciled against a target price for an episode of care. In Model 2, the episode of care will include the inpatient stay in the acute care hospital and all related services during the episode.

For Model 3, the episode of care will be triggered by an acute care hospital stay and will begin at initiation of post-acute care services with a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency.

Model 4 involves a prospective bundled payment arrangement, where a lump sum payment is made to a provider for the entire episode of care.

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