In 1837, Hans Christian Andersen published a tale about weavers promising the emperor a new set of clothes. These expensive robes would be invisible to anyone who was unfit for their position. If a person was ignorant or incompetent, they simply couldn’t see the new and majestic garments.

The emperor, of course, could see the clothes clearly.

Very few models of healthcare delivery have been as misinterpreted and manipulated

as the Accountable Care Organization, the ACO.

How an ACO appears is in the eye of the beholder.

My goal in writing this column is to look a little closer.

The term ACO was first used in 2006 as a possible Medicare payment structure.
It became a part of our healthcare jargon in 2009, when the recycled idea was included
in the Affordable Care Act.

I mean, who could possibly disagree with the idea that healthcare should be accountable? Of course, as physicians, we knew that we were already accountable. We have been accountable for our actions since day one of medical school. Some would argue even sooner, considering the test scores required to get into medical school.

We are accountable to the State Board of Medical Examiners, DEA, Certification Boards, Credentialing Panels, Therapeutic Committees, countless rules and regulations like HIPAA.

We answer to every patient, their families, and their attorneys.

But an ACO is not that kind of accountability. This is financial.

The ACO model seeks to place financial accountability on healthcare providers in hopes of improving care management and lowering healthcare costs.

A noble and worthy pursuit, whose goal is shared by primary care physicians.
No one provides more cost effective care than PCPs.
This is why PCPs are critical, well… actually required, for the ACO model.

These three core principles are the foundation of the ACO model. But then the weavers got involved.

So let’s see where it’s gone since proposed. Here’s some background… fabric, if you will.

The Department of Health and Human Services (who is “accountable” for 25% of every dollar spent by our federal government… you may know them as those guys in charge of Medicare and Medicaid… but they are involved in so much more) proposed the initial guidelines for the establishment of ACOs under the Medicare Shared Savings Program in March, 2011.

ACO guidelines call for improved management and reduced expenses, that is care coordination.
The success of an ACO is based upon its ability to “incentivize” hospitals, physicians, and other providers. 

Pay attention now… this part is very important.
“Incentivize” is business jargon for money. 

Kind of like when Medicare “incentivized” private insurers to get involved in Medicare by paying the insurance company massive amounts higher than Medicare rates.

In other words, ACOs could get lots of incentive money. That’s what the government does when it doesn’t know how to fix something… add infrastructure, regulations, and then incentivize.

Here it comes…
An ACO must have PCPs to get the money. Lots of PCPs means lots more money.

Now you understand why every hospital, insurance company, and healthcare entrepreneur wants to sign you up for their ACO.

Next week we’ll talk about those weavers.

Guy L Culpepper, MD