Accountable Care Organization (ACO) Regulations Proposed

by Holly Hayes

Last week, The New York Times reported the Obama administration has proposed long-awaited Affordable Care Act (the Act) regulations “encouraging doctors and hospitals to band together, coordinate care and cut costs,” through the formation of Accountable Care Organizations (ACOs). In return for this collaboration, the government is offering financial rewards to health care providers that meet detailed federal standards which slow the growth of health care spending.

The proposed rules explain how doctors, hospitals, nursing homes and home health agencies can qualify for federal bonus payments by forming joint ventures known as ACOs. The Act:

includes a number of provisions designed to improve the quality of Medicare services, support innovation and the establishment of new payment models in the program, better align Medicare payments with provider costs, strengthen program integrity within Medicare, and put Medicare on a firmer financial footing.

With respect to quality improvement, the Affordable Care Act includes provisions to expand value-based purchasing, broaden quality reporting, improve the level of performance feedback available to suppliers, create incentives to enhance quality, improve beneficiary outcomes, and increase the value of care.

The concept of value-based health care purchasing is described on the Agency for Healthcare Research and Quality (AHRQ) website as follows:

buyers should hold providers of health care accountable for both cost and quality of care. Value-based purchasing brings together information on the quality of health care, including patient outcomes and health status, with data on the dollar outlays going towards health. It focuses on managing the use of the health care system to reduce inappropriate care and to identify and reward the best-performing providers. This strategy can be contrasted with more limited efforts to negotiate price discounts, which reduce costs but do little to ensure that quality of care is improved.

The key elements of value-based purchasing include:

• Contracts spelling out the responsibilities of employers as purchasers with selected insurance, managed care, and hospital and physician groups as suppliers.
• Information to support the management of purchasing activities.
• Quality management to drive continuous improvements in the process of health care purchasing and in the delivery of health care services.
• Incentives to encourage and reward desired practices by providers and consumers.
• Education to help employees become better heath care consumers.

We welcome any of your thoughts on the new regulations and on the concept of value-based purchasing.

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Holly Hayes is a mediator at Karl Bayer, Dispute Resolution Expert where she focuses on mediation of health care disputes. Holly holds a B.A. from Southern Methodist University and a Masters in Health Administration from Duke University. She can be reached at holly@karlbayer.com.