Module 3 – Case

Features that enable ACOs to control cost and improve quality of care

The idea behind ACOs is that if they are well planned and integrated, they would control cost and improve quality of care. This is because ACOs are collaborative and coordinated in their delivery system such that the delivery system is rewarded by outcomes but not just volumes. On feature that enables ACOs to control cost and improve the quality of care is their structure, which is mostly physician-led, primary care center, and patient-centered. ACOs also have a favorable regulatory climate and different payment incentives, and these provide the most promising mechanisms of controlling costs and improving the quality of care (Kein, 2010). 

Another feature that enables ACOs to control costs and improve the quality of care is the organizational leadership, extensive clinical and administrative integration that ACOs have achieved. Providers can come up with multiple initiatives that are not just limited to specific areas. The organization-wide changes that health care providers have adopted under ACOs are multifaceted in terms of leadership, extensive integration, and buy-in throughout the organizations. 

It is not easy to discuss ACOs and their organization without talking about health information technology. Health information technology is one key feature that has made ACOs possible. Most of these health collaborations have adopted electronic health record systems, patient records, and other tools to enable them to integrate data for use in health population management. The electronic health record system also provides feedback to physicians and health providers. This enables ACOs to use the information to prevent unnecessary readmissions and provide patient-centered care, which leads to reduced costs and improved quality of care. Information sharing across the group of physicians in ACOs also enables them to model the cost of programs to allow cost reduction and improve the quality of care (Kein, 2010). 

Pros and cons of three payment methods of reimbursing ACOs

One of the strategies used to reform health care through ACOs is developing and adopting new payment models that would change how physicians and health care providers are paid to improve the quality of healthcare provision. As a result, various payment methods have been adopted, including Fee-For Service, Global Payment (i.e., risk-adjusted capitation), and episode-based Bundled Payment.

  1. Fee-For Service 

The fee-for-service payment method involves the payment of specific services provided to individual patients. This payment method is easy to understand because each health care product, service, procedure, and intervention used is billed and the patient can make the payment. In health care, fee-for service payment is different from payment of goods and services in other industries as the amount of money to be paid is normally based on what insurers and other health providers have negotiated. The amount of money to be paid is never based on demand for services or the amount the consumer is willing to pay. 

One advantage of free-for service payment method is that the payments are constrained by coding guidelines and rules that define what providers can bill and what clients can pay. Fee for service also encourages health providers to deliver care, and enables the maximizing of hospital visits. This method of payment is also flexible because it can be used in any type and size of health care organization, regardless of the place of service, size of physician practice, or the geographical location of care (Silversmith, 2011). Fee for service also enables providers to be accountable to patient care and does not specify the scope of service that a physician may provide at a particular time. One disadvantage of this payment method is that it does not provide any incentive to provide efficient care and does not prevent unnecessary care. In addition, it discourages care coordination and management by physicians through telephone. Most of the coding and nomenclature used on the bills is complex for patients to understand, and patients might find it difficult to manage and explain numerous bills and benefits (Silversmith, 2011). 

  1. Global payment (i.e., risk-adjusted capitation)

Global payment (i.e., risk-adjusted capitation) involves a fixed prepayment made to a group of health care providers. It covers most of the care for patients during a specified period. Global payment could be paid for a particular period for example monthly per patient instead of paying for each service separately. Global payments mostly cover physician and hospital services, diagnostic tests, prescription drugs, hospice, and other care services. This method of payment enables a large multi-specialty system to receive the global payment from a payer for instance health cover, Medicaid or Medicare for a group of beneficiaries. The body receiving the payment then ensures that all beneficiaries are able to receive the required health services (National Conference of State Legislatures, 2010). 

One advantage of global payment method is that it reduces costs without affecting quality or access to health care. This is because care programs are managed through capitated payments, with less use of inpatient services and lower spending. Global payments also enable risk-sharing among providers and they are associated with lower service use and costs. This payment method is flexible as it allows patients to choose cost-effective providers, which makes providers reduce costs while still maintaining or even improving the quality of care (National Conference of State Legislatures, 2010). It also encourages the coordination and management of patient care by providers and payers. A number of challenges face the implementation of global payment systems as the type of care should be clearly defined and the patient population should be stable. In addition, it requires a lot of risk adjustment to ensure that the level of risks for providers is reduced (National Conference of State Legislatures, 2010). 

  1. Episode-Based Bundled Payment

Episode-Based Bundled Payment involves a single payment for a number of services for a particular treatment that could have involved a number of providers in various settings. This payment method enables health care providers, physicians and hospitals to be paid a single fee for all services provided in inpatient hospitalization, readmissions, and related physician services. Episode based bundle payment method has been adopted by various ACOs including Geisinger Health System which has used the payment method for coronary artery bypass graft (CABG) surgery. One advantage of episode-based bundled payment is its ability to enhance healthcare delivery coordination among multiple care givers. Episode based bundled payment is also flexible in terms of where and how services are provided. It is also efficient and effective in reducing treatment and managing costs because services are coordinated and integrated. Episode based bundled payment method is simple from the billing perspective as a single bill is provided, and enables accountability of care (Silversmith, 2011). 

One disadvantage of episode-based bundled payment method is difficulties in identifying and specifying boundaries of an episode of treatment regarding what type of care falls within the boundaries. This type of payment also limits the choice of provider to patients in terms of geographical preferences as services are provided within specified boundaries. The payment method does not have an incentive to reduce unnecessary episodes as every service is bundled. Health care providers might also find it difficult to avoid high risk patients whose care may exceed the average payment for a single episode (Silversmith, 2011). 


Leave a Reply