How can ACOs reduce costs for Medicare and possibly the Private Insurers?

How can ACOs reduce costs for Medicare and possibly the Private Insurers?

As at the time of this writing, there are 106 new ACO in contractual agreement with Medicare, ensuring that as many as 4 million Medicare beneficiaries now have access to high quality, coordinated care across the United States (Kronick and Po, 2013). It is estimated that at least a 3-year period is needed before the full impact of the ACO in saving cost can be adequately evaluated. While it is still yet too early to effectively gauge the effect of ACO in containing cost, report released by HHS Secretary, Kathleen Sebelius indicated that “expenditure per Medicare beneficiary increased by only 0.4% in Fiscal year 2012”. This was substantially below the 3.4% increase in per Capita GDP. This pattern of low Medicare expenditure per Capita has continued since 2010 which roughly coincided with the enactment of the ACA (Kronick and Po, 2013). While this is an interesting and admirable development, the group is of the opinion that more time is needed to effectively gauge the effect of the ACA/ACO reform in reducing cost as this reduction in expenditure can be attributable to other factors such as the recession in the economy in this time period that resulted in general cut in expenditure in the healthcare.

Looking at the Gotham hospital in particular, judging by its performance since its inception, the success of the model cannot be overstated. In a recent report from the Agency for Healthcare Research and Quality (AHRQ), the agency praised Gotham ACO group of providers for its innovative achievement in containing cost and improving quality of care in spite of its capitated payment structure (Quellette, 2012). The report notes that Gotham ACO has lowered admission, readmission and medical expenses and put a strong emphasis on patients with chronic disease. This success is commendable considering the fact that Gotham has maintained capitation system reimbursement instead of the bundled payment that can potentially increase their revenue. [Is this true? Are they all capitated for Medicare?]It can be projected that even more improvement and success should be expected with the full implementation of the bundled payment in the nearest future in the Gotham ACO. Furthermore, in a white paper recently released by Modern Healthcare Insights (2012), the agency acknowledges the success of the Gotham ACO model in improving patient quality and reducing cost. However, efforts to obtain specific statistical data to enumerate the specific savings was not successful because at the time of writing this paper, the Gotham ACO was still in transition and the ACO members are still expanding. Just recently, The Empire Blue Cross and Blue Shield just entered into contractual ACO agreement with Gotham ACO which started January 1, 2013. This partnership is due to the success of the ACO model. The apparent success of the Gotham Model ACO could be due to the fact that most providers that are part of the Gotham ACO unit have had some form of partnership with Gotham hospital in one way or the other. It still remains to be seen how the ACO will evolve with the full implementation of the ACA. One important factor to note will be the implementation of the individual mandate clause of the ACA which will require mandatory purchase of Health Insurance coverage by all Americans in 2014. The group is of the opinion that the apparent holistic success of this model in curtailing cost will be measured about 2-3 years after complete implementation of the healthcare law, especially the individual mandate. Perhaps another capstone group can research to determine the specific cost savings down the line after the ACO has been in full operation and given more time for adequate assessment.

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However, since Gotham has had a similar pattern of integrated care pre ACA, extrapolation can be made to the likely success based on its previous performance in terms of cost savings. The coordinated and integrated care amongst the group of ACO associated with Gotham has greatly improved patient quality care outcome that has resulted in cost reduction through coordinated care. Examples?

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