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What are ACOs?


What is an ACO?

The term was first used at a MedPAC meeting in 2006 during a discussion between Glenn Hackbarth (Chair) and Elliott Fisher. The concept of “Accountable Care Organizations” has been touted as a way to improve quality while reducing costs in healthcare delivery.1



Fisher and colleagues, who helped create and develop the concept of Accountable Care Organizations, have defined the following principles:

1. Providers need to become accountable for the overall quality and cost of care for the populations they serve.

2. Provider incomes must be decoupled from volume and intensity of services performed; pay should reflect better value: improved outcomes, better quality and reduced costs

3. The ACO should adopt fully transparent and meaningful performance measures on both quality and cost. This is necessary to overcome patient resistance. Also, reliable risk-adjusted measures of overall costs are a required element so as to measure impact of care changes at the local level.2

ACO’s propose moving from a goal of improved care coordination to widespread care integration across settings (office, hospital, ASC, SNF, ), providers (primary care, specialist, advanced practice nurses, physician assistants), especially during transitions of care.


Shared savings

Eligible organizations would require a formal legal structure capable of receiving shared savings. In either an Accountable Care Organization or a bundled payment program, program savings arising from improved efficiencies, savvy negotiation with vendors, and improved health status of patients within the programs are to be shared with the providers, in part to incentivize these behaviors and in part to compensate for lost income from reduced fee-for-service volume.

Some experts propose that primary care physicians should only be affiliated with a single ACO and would have to be the predominant ambulatory care providers for a sufficient number of patients. 2 Fisher and colleagues proposed 5,000 as a minimum. If the population is too small, accurately measuring outcomes and cost savings becomes impossible due to a “signal to noise” problem.

The beneficiaries cared for by the ACO for purposes of shared savings and quality measurement could be determined empirically. Fisher proposed determining the predominant provider by looking at historical ambulatory E/M services.

Fisher suggests basing spending benchmarks on the prior three years of per beneficiary Part A & B spending to determine current year level of spending, and then apply growth rate adjustments. These benchmarks would be compared to actual risk-adjusted spending to determine whether benchmarks had been met and whether shared savings were available for distribution.

Accountability would occur through transparent public reporting of results for patients in the ACO. Fisher proposes moving from technical (process) type measures to patient-level health outcome and experience measures to help assure that ACO’s deliver well-coordinated, patient centered care.

It is likely that elements of Fisher’s model will appear in Federal regulations for Medicare ACOs due to appear in late 2010 or early 2011, based on public briefings by CMS, HHS and other Federal agencies. MedPAC discussions on ACOs have also discussed shared savings designs mostly consistent with the elements described above.


Why should anesthesiologists care?

Accountable Care Organizations have the potential to redefine how healthcare providers both deliver care and receive compensation for their services. In the same way that risk-bearing managed care contracts altered physician-physician and physician-facility relationships in the 1990’s, ACOs, where implemented, will as well.

At this early stage in the ACO movement, anesthesiologists are rarely if ever mentioned. Depending on the venue, either primary care physicians, hospitals or large integrated physician-hospital organizations are seen as the most influential in effective performance of ACOs. Proponents argue that cost savings will arise from keeping patients out of the hospital through better ambulatory care or improving outcomes in hospital through better management of chronic conditions and enhanced care coordination.

Anesthesiologists, as will be demonstrated later in this document, have important roles to play in improving population health, coordinating and managing care in the peri-procedural period, optimizing processes of care to improve efficiency and reliability, and impacting procedural outcome.

For many, the most important reason for anesthesiologists to care about ACOs is that the methodologies that determine payment will substantially change in this model of care. If anesthesiologists do not actively participate in the process and contribute to its success, they may see substantial and undesired changes in compensation.


1. Fisher ES, Staiger DO, Bynum JP, Gottlieb DJ. Creating accountable care organizations: the extended hospital medical staff. Health Aff (Millwood). 2007;26:w44-57.

2. Fisher ES, McClellan MB, Bertko J et al. Fostering accountable health care: moving forward in medicare. Health Aff (Millwood). 2009;28:w219-31.