Imagine a health care system where doctors have a financial incentive to limit unnecessary tests and ensure that patients take better care of themselves.  This system would actually aim to keep patients out of the hospital. 

This is the goal behind Accountable Care Organizations, or ACOs, the latest health care delivery model being touted by D.C. policy wonks and health care gurus.  The current version of the health care reform bill in the U.S. House of Representatives calls for a Medicare pilot project to see if ACOs can lower costs and improve care. 

What exactly is an ACO?  There is no exact answer, but they must include three components: primary care physicians, specialists, and at least one hospital, and the size of the hospital doesn’t matter. These three groups would share responsibility for the quality of care and the cost of care received by the ACO's patients. If the ACO achieves both quality and cost targets, it could receive a bonus; if it fails, its members could face lower Medicare payments. The incentive is to deliver coordinated, efficient care. 

Each ACO would be operated by a group of doctors and hospitals that would be paid by Medicare to care for all the health needs of at least 5,000 elderly or disabled people.

Under the existing fee-for-service system used by Medicare and most private insurers, doctors get paid more by providing more services, and hospitals make more by increasing admissions. With ACOs, doctors and hospitals would get paid based on their ability to hold down overall costs and meet quality standards. In effect, their pay would be based on improving care, not generating more of it.

If the ACOs fail to meet certain quality and cost savings targets, the providers in the ACO would receive lower payments from Medicare.  Conversely, the ACOs would also be rewarded for keeping patients happy and meeting national quality standards, such as making sure men get annual prostate exams and women get their annual mammograms.

In effect, ACOs are an attempt to build relationships between doctors and patients that mimic the closeness that many small town doctors enjoy with their patients.  It’s also an attempt to build integrated health systems like the Mayo Clinic where none exist. But Mayo took several decades to build.  The pilot ACO studies will attempt to see if one can be formed in a year or two.

Creating ACOs requires hospitals and doctors to work closely together and to share financial risk, as well as potential profits.  This means ACOs must break down some pretty serious political and cultural boundaries between hospitals and doctors.  Many doctors prize their independence and don’t want to be bossed around or be treated as employees.

Not all ACOs have to be the same. This could be especially true in rural areas.   The end result, though, is the same: creating an integrated health care organization that is responsible for cost and quality.

If hospitals and doctors are going to live up to this objective, they’re going to have to manage patient health in a more proactive manner.  This means becoming slightly more intrusive.  Imagine a time when the doctor or hospital representative becomes as intrusive as the telemarketer.  The only difference is that the telemarketing call probably raises your blood pressure, whereas the weekly ACO caller is interested in helping you lower it.    How many hospitals are set up to maintain this sort of contact level?  The ones that aren’t may not be ready for the ACO agenda.  Tell me what you are doing to proactively manage your patients’ health.