How is an ACO paid?

How is an ACO paid?

How is an ACO paid?

An ACO can be paid through various payment models, including shared savings, shared risk, capitation, or a combination of these approaches. The most common method of payment for ACOs is the shared savings model, which involves the distribution of savings generated from providing high-quality, cost-effective care.

Under the shared savings model, an ACO sets financial and quality benchmarks with the Centers for Medicare and Medicaid Services (CMS) or other payers. If the ACO meets or exceeds these targets, it may receive a portion of the savings achieved. The specific sharing percentage is determined through negotiations between the ACO and the payer.

ACOs can achieve savings by improving care coordination, reducing unnecessary tests and procedures, and implementing cost-effective treatment measures. The savings are calculated by comparing the actual healthcare costs incurred to what would have been expected in the absence of the ACO's efforts.

Quality performance is a significant factor

While savings are a critical component of ACO payments, quality performance measures are equally important. ACOs must demonstrate their ability to provide high-quality care by meeting specific quality metrics. These metrics cover various aspects of patient care, such as preventive screenings, patient satisfaction, management of chronic conditions, and care coordination.

ACOs are assessed based on their performance in these metrics, and their payments may be adjusted based on their quality scores. Higher quality scores can result in increased shared savings or improved financial arrangements with payers. CMS, for instance, offers ACOs higher sharing rates if they achieve a higher quality score.

Shared risk models

In addition to the shared savings model, ACOs may also opt for shared risk models. Shared risk models involve assuming financial responsibility for a portion of the healthcare costs incurred by the assigned population. ACOs under shared risk models may be eligible for higher sharing percentages if they meet specific performance targets but may also face financial penalties if they do not achieve these targets.

The shared risk approach encourages ACOs to take more significant accountability for patient outcomes and cost management. It incentivizes them to invest in strategies that improve care quality while also controlling expenses.

Capitation as a payment model

Another payment model for ACOs is capitation. Capitation involves receiving a fixed per-member-per-month payment from the payer, regardless of the number of services provided. This payment model transfers all financial risk to the ACO, and it is commonly associated with global budgeting.

With capitation, ACOs have a fixed budget to cover all necessary care for an assigned population. They must carefully manage their resources to deliver efficient and effective care within the budget constraints. If the ACO can provide high-quality care while staying within the budget, it may retain any surplus funds.

Conclusion

The payment structure of an ACO is essential for incentivizing providers to deliver coordinated, cost-effective, and high-quality care. The shared savings model, combined with quality performance measures, is the most commonly used payment model for ACOs. However, shared risk models and capitation are also viable options for those ACOs who wish to take on greater financial responsibility and risk. The ultimate goal of any payment model for ACOs is to align incentives with the delivery of value-based care and promote better patient outcomes.

Frequently Asked Questions

An Accountable Care Organization (ACO) is typically paid through a performance-based payment model. This means that ACOs receive financial incentives or penalties based on their ability to meet certain quality and cost-saving targets. The specific payment arrangements can vary, but commonly include shared savings arrangements or capitated payments.

Shared savings arrangements involve ACOs receiving a portion of the savings they generate in healthcare costs. If an ACO is able to provide high-quality care while reducing unnecessary medical expenses, they can share in the savings achieved. This creates an incentive for ACOs to coordinate care effectively and improve overall patient health outcomes.

Capitated payments involve ACOs receiving a fixed amount of money per patient, regardless of the actual services provided. This payment model encourages ACOs to focus on preventive care and efficient service delivery, as it shifts the financial risk of unnecessary or expensive procedures onto the ACO itself.

While shared savings arrangements and capitated payments are the most common payment models for ACOs, there can be variations or hybrid models as well. Some ACOs may receive a combination of fee-for-service payments and shared savings, where a portion of the fee-for-service revenue is at risk for achieving quality and cost targets.

ACO payments are determined based on various factors, including the specific payment model in place, the ACO's performance in meeting quality and cost targets, and the number of patients served. Payments can be calculated on a per-patient basis or as a percentage of costs saved or quality benchmarks achieved.