Accountable Care Organizations in the Era of Healthcare Reform

Mark B. McClellan
Mark B. McClellan Former Brookings Expert, Director, Margolis Center for Health Policy - Duke University

August 30, 2010

Under the Patient Protection and Affordable Care Act (PPACA) of 2010, Medicare providers, including physician groups and hospitals, will soon have the option to form accountable care organizations (ACOs) to improve quality and efficiency. ACO participants may share financial gains generated from improved clinical and economic performance, provided that quality goals and patient safeguards are met. Through future regulations, the Centers for Medicare & Medicaid Services (CMS) must implement the ACO option no later than January 1, 2012.

In this interview, Mark McClellan, a former CMS administrator and U.S. Food and Drug Administration commissioner, discusses the extraordinary implications of the new ACO option for improving patient care and reducing unnecessary costs with American Health & Drug Benefits Health Policy Editor Kip Piper.

KIP PIPER: You and your colleagues were influential in developing the ACO concept and successfully persuading Congress to make ACOs an option in Medicare. Are you surprised by the tremendous interest in ACOs since enactment of the PPACA this year?

MARK MCCLELLAN: There has been a real expansion of interest in ACOs recently, and some of that is not surprising. The key ideas behind accountable care have been around for a while. CMS has implemented some Medicare demonstration programs previously that potentially use ACO concepts, and a number of private payers and providers have been working on ACO implementation as well. I have been a bit surprised by the breadth of interest. It is a reflection of how seriously providers and payers are taking the healthcare reform law.

However, unlike many of the other provisions on payment reform, ACOs will be a real part of Medicare as of 2012, if not earlier; not a pilot, not a demo, but a part of the Medicare program. That may be contributing to the interest too. And finally, there is growing interest in making sure that payment policies fit together to add up to getting better value, getting higher quality, and avoiding unnecessary costs. That’s contributing to the interest in ACOs. It is a confluence of factors, and in retrospect I should not be so surprised by the intense interest in the ACO model.

PIPER: What are some of the factors critical to successfully implementing an ACO?

MCCLELLAN: One is a critical mass of providers who are willing and able to meaningfully take accountability for the well-being of a population of patients. This includes a primary care network and other types of healthcare providers, maybe even some providers who are involved in things that are not traditionally thought of as healthcare, such as wellness programs and population health management. But the key thing is that there is a critical mass of providers who are willing to work together and are able to take meaningful steps to get to better health for those beneficiaries.

Second, there also is a need for a critical mass of payers. There needs to be enough reform in the way payments work so that steps that traditionally do not make much financial sense—such as promoting better coordination of care, taking steps to reduce complications and readmissions, and exchanging information effectively—make more financial sense. And that takes enough of the payer community to get behind the effort as well.

Having both providers and payers simultaneously jump together is a challenge, but there is certainly a growing number of examples of ways to do it successfully. In the end, the success of ACOs is going to depend on actually reforming care so that costs are lower and results are better. It’s not just a matter of getting the critical mass (of providers and payers), but actually having meaningful steps that can be taken. These steps can take a little time, and certainly some effort, to reform the way healthcare works, which requires a commitment of time, effort, and expertise to meaningfully redesign care.

Read the full interview at the American Health & Drug Benefits website »