Governance and Accountable Care Organizations

Decision Map

Download(1 page PDF)(1 page PDF) the Goverance and Related Issues decision map.

Accountable Care Organization (ACO) Leadership

Governance and structure should be your central concern in evaluating an accountable care organization (ACO). Questions to consider include:

  • Can the leaders readily list the ACO stakeholders and explain how each will contribute to patient care, quality improvement, and cost reduction? If not, the ACO is probably still too nascent to function well.
  • Is the governing body representative of the organization? (ACOs participating in the MSSP are required to have beneficiary representation and at least 75 percent provider representation on the governing board.) If the ACO includes employed and independent physicians or members of a participating IPA, both groups should be represented. As a family physician, your perspective would be useful to any ACO board. If you do not want that level of involvement, it is still valuable to know that the board of the ACO has strong family medicine and other primary care representation.
  • Especially in ACOs that take commercial contracts, leaders should thoroughly comprehend where the ACO stands with respect to antitrust laws, Stark laws, anti-kickback laws, etc. The PPACA does enable ACOs operating within the MSSP to avoid such legal issues, but outside the MSSP, things are different. As an organization of potentially independent providers contracting with payers, ACOs established without expert legal advice can run aground on any of them.
  • Do the leaders appreciate the potential for improved quality and reduced cost that primary care offers? If not, the ACO may be too stuck in outmoded styles of practice to succeed.

Basic Structure and Role of the Hospital

The organizational structure of the ACO can have implications for its behavior and likelihood of success.

An ACO developed by  an IPA may be:

  • Smaller and less well capitalized than one based on an integrated delivery system (IDS)
  • More challenged to develop a strong, centralized leadership and the kind of process standardization needed to maximize efficiency and quality
  • More likely to appreciate the opportunities for quality improvement and cost reduction offered by primary care

A hospital-led ACO or one developed by an IDS may be:

  • Better capitalized, better managed, larger, and able to realize savings across a wider range of settings
  • Too hospital oriented; that is, it may spend more time and effort improving the quality and efficiency of hospital care than working to keep patients out of the hospital
  • Trapped in the traditional view of primary care networks as referral channels funneling patients into the hospital

An ACO that includes employed and aligned physicians may have different expectations of and for the two groups. If you are looking at such an ACO, make sure you understand how the groups differ for primary care physicians and for referral specialists.

An ACO may hire or include a management services organization (MSO) to help with administrative functions. That is not a good or bad sign in itself. It may indicate that the ACO recognizes the value of professional management. Still, you may want to ask the ACO, colleagues, and your state academy for any information they can give you on the reputation and abilities of the MSO.

Family Physician Participation

You should be confident that the policies that will govern your practice are ones you can be comfortable with. Given that processes and workflows are likely to be standardized in an ACO, family physicians and other primary care physicians should be involved in the development of workflows, clinical policies, and policies in general – anything that affects primary care practice.

Patient Attribution

Even if you know from the outset that patients are attributed to the ACO by virtue of where they get the largest proportion of their primary care, you will want to ask whether attribution is carried out prospectively or retrospectively:

  • Prospective attribution uses claims data from previous years to determine patient attribution. This methodology allows the ACO to know up front which patients they will be held accountable for during a given year. On the other hand, it may count patients who do not meet inclusion criteria during the current year, who choose to receive the bulk of their care outside the ACO. This “leakage” can be a source of significant cost for the ACO, and is a condition over which it has relatively little control.
  • Retrospective attribution assigns beneficiaries to an ACO at the end of a given year of ACO operation (a "performance year") by looking back over that year's data to see which patients qualified for attribution to the ACO during the year. This ensures that only patients who met the program criteria in the performance year are counted toward the ACO’s attributed lives for that year. This methodology, however, means that you won't know whether any patient you see will count until the end of the year.

The MSSP tries to balance the strengths of these respective methodologies by using a hybrid approach comprising a preliminary prospective attribution with updates during the year and a year-end retrospective reconciliation to count only those beneficiaries who met the attribution requirements for the whole year.

Patient attribution can be further complicated if the primary care physicians or other providers on whom attribution is based have some patients inside the ACO and some outside, or some in one ACO and some in another that contracts with the same payer. To avoid this problem, the MSSP requires providers on whom attribution is based to be exclusive to one participating ACO, except under special circumstances.

Shared Savings – and Risk

Naturally, you will want to know all you can about how the payer shares any shared savings with the ACO, and how those savings are distributed. Important questions about payments to the ACO include:

  • Which payers are represented in the ACO?
  • What quality and efficiency criteria must be met for the ACO to share in savings?
  • Does the ACO have an estimate of the shared savings it expects to earn? If so, on what assumptions is the estimate based?
  • Does the ACO have any contracts with downside risk? How great a loss might it sustain?

The successful ACO is likely to distribute at least some of the savings in proportion to providers' contributions to value: care improvement and cost reduction. Shared savings can also be distributed based on percentage of attributed patients. That is, the physician who manages 5% of the patients in an ACO might be entitled to 5% of a portion of the savings.

The ACO that contains a hospital faces the question of how to divide savings fairly among the hospital and individual physicians; make sure you consider the division fair.

Whatever the ACO's distribution rationale, be sure you understand it. Ask for a conservative estimate of what the ACO expects your portion of the shared savings will be, if any. If the ACO accepts downside risk, ask how much risk you will be taking on.

Physician Buy-in

An issue that cuts two ways is whether the ACO requires physicians to buy in when they join:

  • Depending on the share price, the buy-in cost may be a significant barrier to participation.
  • On the other hand, it may show the ACO's healthy awareness that startup requires significant capital.

Buy-in fee or not, be sure you understand how the ACO plans to fund all the infrastructure development it will need to succeed. Startup costs can begin at as much as $1 million. (Another way an ACO can fund its ongoing activities is through a practice assessment, for which providers pay a small percentage of their collections to the ACO. Ideally, this percentage is small enough to be offset by shared savings in the future.)