In this preview of an article from Issue XXIV, Volume 5 of the PLUS Journal (May 2011), author Mary S. Botkin looks at the hot-button issue of Accountable Care.

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Accountable Care Organizations Bring New Challenges to Risk Managers

Health care reform puts Accountable Care front and center during the next two years of expected mergers, acquisitions and contracting activities by health care organizations, absent any impediments created by the newly elected Congress. While hospitals have had risk managers, as mandated by JCAHO, there is no specific requirement within HCR mandates that an ACO has a risk manager.  It is therefore likely that if the ACO is owned by the hospital, the hospital’s risk manager will inherit the management of the ACO’s risk as an additional duty.



According to a recently published Glossary of Terms provided by Kaiser Family Foundation, an Accountable Care Organization (ACO) is: “A network of health care providers that band together to provide the full continuum of health care services for patients. The network would receive a payment for all care provided to a patient, and would be held accountable for the quality and cost of care. New pilot programs in Medicare and Medicaid included in the health reform law would provide financial incentives for these organizations to improve quality and reduce costs by allowing them to share in any savings achieved as a result of these efforts. Risk managers can also read more about ACOs in the Kaiser Family Foundation website and additional resources listed at the end of this paper.”

BACKGROUND ACO and medicare

Originally proposed with the goal of incentivizing Medicare providers toward more efficient and cost-effective care – and not charging for hospital-acquired illness or deviation from expected outcomes – Accountable Care has become a permanent part of The Patient Protection and Affordable Care Act (PPACA), H.R. 3590 and The Health Care & Education Reconciliation Act (HCERA) of 2010.



According to the Act, ownership can be:

  • Physicians and other professionals in group practices
  • Physicians and other professionals in networks of practices
  • Partnerships or joint venture arrangements between hospitals and physicians/professionals
  • Hospitals employing physicians/professionals
  • Other forms of ownership that the Secretary of Health and Human Services deems appropriate

Accountable Care Organizations (ACOs) can be formed as pilot programs by hospitals.  Integrated with other health care providers, ACOs enable these hospitals and other key providers, such as physician groups, to share in the government-sanctioned Medicare cost savings that they deliver (Medicare’s value-based purchasing programs with hospitals involves data reporting of quality benchmarks, efficiency incentives paid to providers, “bundled” services billing and collection, and ultimately penalties for underperformers).

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