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Accountable Care Organizations

By: Stephanie Chiu and Elissa Tam, PharmD Candidates c/o 2015

According to the Dartmouth Atlas project, health care spending in the United States has risen dramatically and yet health outcomes are not improving; meanwhile, many other countries that spend far less per person than the United States have better health outcomes.1 Studies have since displayed that higher spending did not necessarily lead to improved patient perceptions of the accessibility or quality of medical care and that higher volume of care does not produce better health outcomes for patients.1 This means that many of the health services administered in the United States are what experts call “excess” care: services that are costly but provide no additional measurable benefit to patients. In fact, researchers estimate that up to 30 percent of current health care spending is wasteful.1 The significant variation in health service usage and spending suggests that large savings could be found within the current Medicare system. Specifically, hospitals and their affiliated physicians should be able to reorganize their treatment services to provide the same quality of care using fewer services and at lower costs. Transitioning from a Medicare pay-for-service payment model – doctors and hospitals generally paid for each test or procedure – to a pay-for-performance model was made possible by the creation of accountable care organizations (ACOs). Since institutions would be rewarded for performance, quality measures were implemented to assess quality of care and patient outcomes.1


What are ACOs?

Since the Affordable Care Act was passed, more than 250 ACOS have sprung up.2 ACOs are networks made up of physicians, hospitals and other health care providers that share financial and medical responsibility for providing and coordinating high-quality patient care, especially to chronically ill patients by limiting avoidable expenses and preventing medical errors. Health care providers volunteer to participate in a network.3 The ACOs are rewarded financially with shared bonuses by the Centers for Medicare and Medicaid Services (CMS) for being cost-effective and performance is based on quality measures.4 Thus, these health care providers become eligible for bonuses when they deliver that care more effectively. Under the Affordable Care Act, each ACO is accountable for the health care of a minimum of 5,000 Medicare beneficiaries for a period of at least three years.2 Unlike some insurance plans, Managed Care Organizations(MCOs) or Health Maintenance Organizations (HMOs), an ACO cannot restrict a Medicare beneficiary from seeing any health care provider.5 Medicare beneficiaries have the right to pick any physician or hospital that accepts Medicare at any time, even if the hospital or physician is not part of an ACO.


Types of ACOs

There are currently various models of ACOs. One such model is called the Advance Payment ACO Model, in which selected participants receive advance payments that will be repaid from the future shared savings they earn.6 Such a model is meant to help entities such as smaller practices and rural providers with less access to capital and targets specifically two types of organizations: 1) ACOs that do not include any inpatient facilities and have less than $50 million in total annual revenue, and 2) ACOs in which the only inpatient facilities are critical access hospitals and/or Medicare low-volume rural hospitals and have less than $80 million in total annual revenue.6 These rural providers and rural hospitals may not have the necessary amount of money to build the infrastructure necessary for coordinated care – thus, they can apply to receive payments in advance and pay off the payments later in the future.

Another model created is called the Pioneer ACO model, a program created for those who adopted coordinated care early. This model is intended for health care organizations and providers with experience in coordinating care for patients across care settings.7 Before ACOs were created and established, there were already large multi-specialty physician groups that became ACOs on their own by networking with neighboring hospitals.2 Because they already have experience in managing patient care across various care settings, the program was set up for these programs to pocket more of the expected savings in exchange for taking on greater financial risk.2


Quality Measures

As previously mentioned, the performance of each ACO is measured based on quality outcomes and such measurements determine the scope of monetary rewards and benefits earned. Essentially, these health care providers are paid more for keeping their patients healthy and out of hospital. CMS has created 33 quality measures focusing on patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk population.4 Of the 33 measures, 7 measures of patient/care giver experience are captured using the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey. These surveys are administered yearly to patients that participate in these Medicare ACOs. Three are measured using claims, one is measured using the Medicare and Medicaid Electronic Health Records (EHR) and 22 are measured using the ACO Group Practice Reporting Option (GPRO) Web Interface.4 These areas of measurements evaluate various domains such as how well the doctor communicates with the patient, ratings of the doctor, health promotion and education, shared decision making, medication reconciliation, and screening assessments for mammography, depression and weight. If the ACO does not meet savings and performance targets, they may have to pay a penalty, although currently no penalties have been established.


Role of Pharmacists in ACOs

Over the past 25 years, studies have demonstrated that pharmacists participating in team-based care models have made positive contributions to patient care and safe medication use.8 Pharmacists are well trained in pharmacotherapeutics and can help optimize appropriate medication use, reduce medication related problems, and improve health outcomes. By incorporating pharmacists into the ACO model, it will help better effectively coordinate and improve quality of care. Organizations across diverse care settings are already implementing pharmacy services, including medication therapy management (MTM).8 Pharmacists and their skills are currently utilized in clinics for lipid and hypertension, anticoagulation therapy, and transplant programs. They also participate in brown bag events during which patients bring their home medications in for pharmacists to evaluate and counsel on. Furthermore, many of these activities implemented are evaluated as part of the CMS quality performance standards for ACOs, which include medication reconciliation and appropriateness of therapy in at-risk populations with disease states such as diabetes, heart failure, and chronic obstructive pulmonary disease (COPD).8

Pharmacists are already integrated in various medical model groups. For example, HealthCare Partners, a group based in California, employs pharmacists to monitor and manage patients taking warfarin through face-to-face clinic visits and telephone calls for patients in outlying areas. These pharmacists work alongside more than 1,200 employed and affiliated primary care physicians and more than 3,000 employed and contracted specialists, as well as over 50 clinics and contract with more than 57 hospitals within Los Angeles and Orange counties.8 . In addition, pharmacists in the group monitor patient labs, educate patients on taking their medications, assess adverse events and adherence to therapy, and recommend dosing adjustments/alternate therapies when needed in order to prevent potential hospitalizations and severe side effects. Protocols are set up for pharmacists to approve refills and move patients to lower cost medications, when appropriate. This program reduces physician time to manage patient refill requests and improves the overall group’s performance.8



For many years, health practitioners followed the fee-for-service approach. Patients were charged per each consultation, service or test. However, despite the high costs of health care, it appeared that patient outcomes did not improve nor did the rate of mortality curb. In pay-for-service, it gives incentive for physicians to provide more treatments because payment is dependent on quantity of care, rather than quality of care. Moreover, because many people see multiple doctors and there is lack of communication among these physicians, doctors may duplicate certain therapies, which raises health care costs and impacts the patient’s care. With the new Affordable Care Act, ACOs create incentives for health care providers to work together to treat an individual patient across various care settings, including doctor’s offices, hospitals, and long-term care facilities. ACOs make providers jointly accountable for the health of their patients and thus, for ACOs to work, providers have to seamlessly share information.2 Furthermore, the incentives behind ACOs are to reduce hospital stays, emergency room visits and expensive testing services. These ACOs are rewarded when they meet performance standards on quality of care and reduce the growth of health care costs. Recent data suggests that by moving patients from uncoordinated care systems to integrated care systems with targeted interventions and coordination across providers, costs of care could be reduced by 35 percent.8 The hope is that implementation of pay-for-performance and interdisciplinary care will combine quality and efficacy incentives to produce cost savings. Pharmacists have the opportunity to become vital components of the new model.



  1. Medicare Spending. The Dartmouth Atlas of Health Care. http://www.dartmouthatlas.org/keyissues/issue.aspx?con=1339. Accessed August 20, 2014.
  2. 2.FAQ on ACOs: Accountable Care Organizations, Explained. Kaiser Health News. http://www.kaiserhealthnews.org/stories/2011/january/13/aco-accountable-care-organization-faq.aspx.Published April 16, 2014. Accessed August 20, 2014.
  3. Accountable Care Organizations. Centers for Medicare and Medicaid Services. http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/ACO/index.html?redirect=/ACO. Published March, 22, 2013. Accessed August 20, 2014.
  4. Accountable Care Organization 2014 Program Analysis Quality Performance Standards Narrative Measure Specifications. Centers for Medicare and Medicaid Services. http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/ACO-NarrativeMeasures-Specs.pdf. Published June 30, 2014. Accessed August 20, 2014.
  5. Accountable Care Organizations & You: Frequently Asked Questions (FAQs) for People with Medicare. Centers for Medicare and Medicaid Services. http://www.medicare.gov/Pubs/pdf/11588.pdf. Published February 2014. Accessed August 20, 2014.
  6. Advance Payment Accountable Care Organization (ACO) Model. Centers for Medicare & Medicaid Services. January 10, 2013. Accessed August 31, 2014.
  7. Pioneer Accountable Care Organization Model: General; Fact Sheet. Center for Medicare and Medicaid Innovation. September 12, 2012. Accessed August 31, 2014.
  8. Pharmacists as Vital Members of Accountable Care Organizations. Academy of Managed Care Pharmacy. 2011. Accessed August 31, 2014.

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Published by Rho Chi Post
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