Accountable care organizations are a new health care model that are gaining popularity. Many experts would agree that healthcare in the United States suffers from a degree of incoordination and fragmentation. Estimates suggest that two out of three Americans over the age of 65 have multiple chronic medical conditions and require medical care by myriad providers. Proper communication between providers and coordination of care for a patient requiring diagnostic tests and a variety of treatments can be a daunting task for healthcare providers in today’s convoluted healthcare system. Consider a hypothetical patient with chronic obstructive pulmonary disease, diabetes, heart failure and arthritis. This hypothetical patient is common. He will likely need medical attention by multiple doctors including a primary care physician, a pulmonologist to treat lung disease, an endocrinologist for his diabetes, a cardiologist for his heart failure and an orthopedic surgeon if his arthritis becomes severe enough to require surgical attention. If he has exacerbation of his lung disease or heart failure, he would require a hospitalization where he may be cared for by a multitude of new doctors. Coordinating care and avoiding repeat medical tests in this patient is challenging for providers in today’s fragmented system. As a result, duplicate tests and treatments are administered, costing the system money and placing patients at risk of adverse events. Patients may receive multiple imaging studies exposing them to unnecessary radiation or be given multiple doses of an antibiotic that was meant to be administered only once.

As a response, the Department of Health and Human Services proposed the implementation of Accountable Care Organizations (ACO) to enhance coordination and reduce inefficiencies in healthcare. ACOs improve coordination by bringing together a group of physicians, hospitals, and long-term care facilities within a community to provide more synchronized care for patients. In the ACO setup there are more resources allocated to care coordination and improved communication between physicians. ACOs were included in President Obama’s healthcare reform law and are defined loosely as “an entity that will be ‘held accountable’ for providing comprehensive services for a population.”

ACOs would offer incentives to keep costs down. You may wonder exactly how ACOs enhance coordination and reduce inefficiencies. The answer lies mainly in incentives and bonuses offered when ACOs keep costs down and achieve benchmarks of quality of care and health outcomes. Under the ACO model, healthcare providers are rewarded if their diabetic patients’ blood glucose levels are kept under control or costly tests are not repeated in a patient. As such, ACOs foster an environment of communication and information sharing both among providers and between a provider and patients. Introducing financial incentives for provision of high quality care is a shift from our current system. According to Dr. Ezekiel Emanuel, a former White House Health Policy Advisor and head of the NIH Department of Bioethics, today’s fee for service healthcare system encourages providers to focus on treating episodes of illness in isolation: “This system supports overtreatment and leads to mistakes and miscommunications when patients are sent between their primary care doctors, specialists and hospitals.” Emanuel says that in today’s system, if a hospital hires a nurse to help a patient keep his blood sugar levels under control, it suffers financially because it has to pay for the nurse, and because of lost revenue from the averted hospitalization. ACOs change this paradigm by linking financial revenue to patient health.

Because of the potential to improve quality and reduce healthcare costs, ACOs have been included in the Obama Administration’s Patient Protection and Affordable Care Act. Dr. Elliot Fisher, Professor of Medicine at Dartmouth Medical School and a healthy policy expert, says the concept of ACOs first emerged at a meeting of the Medicare Payment Advisory Commission, a body responsible for making recommendations to congress on changes to Medicare. At this meeting, it was suggested that the Medicare payment program be revised to reward providers for practices that improve quality and reduce costs. According to Dr. Fisher, after careful collaboration with the Congressional Budget Office and financial modeling, it was concluded that ACOs would in fact result in healthcare savings.

How much these savings will add up to remains to be seen, especially with questions about legal aspects of the Affordable Care Act. As the Supreme Court reviews the case of the Affordable Care Act this week, the impact of the decision of the Supreme Court justices on the constitutionality of the individual mandate on ACOs remains unclear. Despite the controversy, it seems for now that healthcare systems are adopting the accountable care model. Just a few days ago Cigna and Fairfax Family Practice Centers, a primary care family practice based in Northern Virginia, reported beginning a joint collaboration based on the ACO model. As ACOs expand across the country and more data is collected on their real cost savings and health outcomes, we will learn more about their true impact. Furthermore, we will develop more clear answers to the fundamental question of how much financial incentives to providers may impact quality of care and health outcomes.