Are ACOs the Answer to Rising Health Care Costs?

As part of Health Care Reform, the government is trying to streamline the delivery of health care services to help control the rising cost of benefits. But how do you slow a runaway train? Enter Accountable Care Organization (ACO) legislation—laws that create financial incentives for health care providers to eliminate unnecessary procedures and focus on preventive health care.

To give you some insight as to why this legislation is important for Health Care Reform to actually reduce the cost of health care, remember that providers are paid for their services; the more services they provide, the more money they make. In theory, ACOs would help eliminate the financial incentive of providing unnecessary tests, procedures and care.

An ACO would allow physicians, hospitals and other health care providers to come together under an umbrella organization, making them accountable for both the health of their patients and the cost of delivering care. The concept is designed to allow for a higher level of coordination of care and more efficiency.

In theory, ACOs would allow providers to share in the savings of delivering the right care at the right time.  However, the first wave of ACO legislation was announced by the U.S. Department of Health and Human Services (HHS) in March 2011 and was met with quite a bit of negative feedback regarding the difficulty of implementing the plan due to challenges with compliance. HHS took the feedback into consideration and released a revised proposal in early November.

People generally agree that, although improved, the new rules still won’t deliver on the cost containment promised by Health Care Reform. The challenges to implementing ACOs are twofold:

1. The cost of creating the infrastructure is very high and many insurers run the risk of losing money if they aren’t able to generate enough savings with the new program

2. The program is designed to incentivize health care professionals and insurers by promising them a savings bonus, which currently may equal less than if they did not adjust their procedures.

Although sound in concept, ACOs still have a long way to go before they can consolidate the fragmented world of health care.