ACOs to Reduce Costs and Improve Health Care

Health care professionals have recently taken on a new entity called an accountable care organization (ACO) to make overall improvements to the health care industry. This entity is being created in various cities among groups of local doctors and hospitals with the hopes that it will make health care more affordable.

ACOs Spurred by Health Overhaul Law

Hospitals and doctors around the country have begun to create ACOs with the idea that they would provide more efficient health care at reduced costs. The idea came from incentives handed out with the federal health overhaul law. If hospitals and local physicians could work among themselves to form companies that would link directly with health insurance companies and Medicare, they could earn financial rewards for saving health care dollars.

An ACO has already begun forming in Arizona at the Tucson Medical Center. If it is able to form successfully and reduce costs for its Medicare patients by a certain percentage below a benchmark then it will receive extra payments.

Will ACOs Actually Help Save?

Medicare costs were about $509 billion in 2009, which was a 9-percent increase from the year before. The goal of these entities is to drive costs down for the 46 million seniors and people with disabilities. While ACOs set out to save money, some question whether they will actually save or drive costs higher instead.

The main concern is that with hospitals bulking up through mergers–mostly through acquiring doctors’ practices or hiring more doctors to better coordinate care–they will end up spending more than they save since hospitals are often paid more than doctor-owned clinics for some outpatient services and imaging.

Another problem that some think could arise from ACOs is that private patients who visit hospitals and doctor-owned facilities could be forced into higher costs based on their newly-found market clout.

In order for ACOs to benefit from the health care overhaul incentives, they must care for at least 5,000 Medicare beneficiaries and have systems in place that will help them report on quality and cost measures. Since they don’t officially launch until 2012, it will be difficult to know just how they will affect health costs–or if they will actually improve care–anytime soon.