ACOs and the Little Guy

March 12, 2011

Can you hear the rumblings through the hallways? Hear it? – “The ACOs are coming, the ACOs are coming!” As a result of healthcare reform, yes they are. So what is an ACO and how might it impact the small physician practice?

An Accountable Care Organization, called an “ACO” for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it. For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.

The following minimum requirement to participate with Medicare as an ACO:

  • Have a formal legal structure to receive and distribute shared savings
  • Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
  • Agree to participate in the program for not less than a 3-year period
  • Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
  • Have a leadership and management structure that includes clinical and administrative systems
  • Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
  • Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.

Many major hospital systems and large medical group practices are already preparing to launch accountable care organizations, hoping that ACOs will help put them back in the driver’s seat. So where does this all leave very small medical groups and solo practitioners? A few quick facts as they exist right now:

Participation in the Shared Savings Program is not mandatory. Physicians, hospitals, and other suppliers and providers that are not part of an ACO will still be permitted to participate in Medicare and receive the same fee-for-service payments as providers and suppliers that are part of an ACO. As mentioned above, a Medicare patient still has the freedom of choice to choose his or her healthcare provider.

Neither ACOs nor providers or suppliers that are not ACOs will have their Medicare payments reduced as a result of the Shared Savings Program.  Both ACOs and non-ACO providers and suppliers will continue to receive traditional fee-for-service payments under Medicare Parts A and B. A non-ACO provider or supplier will not receive lower fee-for-service payments as a result of not being part of an ACO and not participating in the Shared Savings Program. Similarly, providers and suppliers in an ACO that does not meet the quality performance standards and cost-savings targets will not receive lower fee-for-service payments as a result.

So the most likely avenue for small medical group ACO participation is alignment with a physician-hospital organization, which are being launched by an increasing number of hospitals in preparation for ACO certification. Some call PHOs a natural path to ACO development, while a few have characterized properly structured PHOs as ACOs in disguise. We’ll just have to wait and see.

We are all in a waiting game when it comes to ACOs (Regulations are coming soon) so all healthcare providers must stay on top of ACO development. Consolidation fears aside, the future for physicians who decide not to play could be very unfriendly.  You can continue to go it alone and rely on fee-for-service (FFS) medicine but eventually, however, that may disappear should the he system move to bundled payments.

Reed Tinsley, CPA is a Houston-based CPA, Certified Valuation Analyst, and Certified Healthcare Business Consultant. He works closely with physicians, medical groups, and other healthcare entities with managed care contracting issues, operational and financial management, strategic planning, and growth strategies. His entire practice is concentrated in the health care industry. Please visit

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