Brett Furst, Chief Strategy Officer, Payformance Solutions

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Healthcare providers may benefit from joining or creating an accountable care organization.

Accountable care organizations (ACOs) have demonstrated the ability to lower healthcare costs. Very soon, it’s likely they’ll also need to show they can take on more downside risk.

First launched by Medicare in 2012, ACOs are groups of doctors, hospitals, and other providers who join together voluntarily to deliver coordinated, high-quality care to their patients.

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Recent data from the Centers for Medicare & Medicaid Services (CMS) revealed that 472 ACOs in the Medicare Shared Savings Program (MSSP) 

 last year, but CMS wants more. “The time has come to put real ‘accountability’ in ACOs,” CMS Administrator Seema Verma, M.P.H., said this past summer. “Medicare cannot afford to support programs with weak incentives that do not deliver value.”

While it’s certainly fair to question the accuracy of Verma’s statement — if ACOs achieved a combined $1.1 billion in savings, how is it that they “do not deliver value”? &mdash; it’s unwise to question Verma’s resolve in adjusting Medicare’s ACO program. Critics such as Verma contend that ACOs have not done enough to reduce the cost of care because their downside risk is insufficient to incentivize provider behavior change &mdash; and they appear poised to do something about it.

 to reduce the length of time that ACOs can participate in the popular, upside-only MSSP program from six years to two. The message is clear: More risk is coming, and ACOs need to prepare.

Indeed, for providers to assume more risk for the cost and outcomes of their patients is central to the concept of value-based care. As ACOs are forced to grapple with additional risk, providers interested in participating in the program should keep in mind the following three tips that will help to achieve success in value-based reimbursement arrangements.

Designed to align incentives among payers and providers, ACOs are held “accountable” (though maybe not according to Verma) for their patients’ cost and quality of care. That means an ACO shares in savings if it keeps total patient spending below its given target, but the ACO is financially penalized if spending exceeds the target.

Unfortunately, getting an ACO off the ground can be a significant challenge. Many initial administrative tasks exist, from setting financial targets to creating reporting and operating structures. The good news is that ACOs with more experience are more likely to generate cost savings, according to CMS. But in the beginning, ACO participants should prepare for a bumpy ride.

In addition to the initial administrative tasks, among an ACO’s most critical early endeavors is to understand its patient population, which is essential to creating a strong population health program. A robust patient registry is a key component. The registry should include the obvious — claims and clinical data &mdash; but also social determinants of health information, such as patients’ living conditions, access to transportation and employment.

Collecting and maintaining the data isn’t enough, however. It should be shared among all stakeholders caring for the patient, such as primary care physicians, specialists and care coordinators, for example. By placing actionable information at the fingertips of front-line providers, ACOs may be able to treat emerging health conditions before they develop into more costly problems.

The idea behind ACOs is to generate savings by eliminating waste and unnecessary spending, which is achieved by aligning providers’ incentives around cost and quality goals. To determine what those goals should be, ACOs must measure cost and quality performance across all defined clinical episodes within their networks, in search of opportunities to reduce costs and utilization.

Once again, alignment is essential. Value-based agreements between an ACO’s participating providers and payers must establish common procedures and guidelines for performance measurement. After identifying high performers, determine the best practices that drive performance and implement those across all network participants. To incentivize compliance with best practices, value-based agreements must include mechanisms to reward those who meet cost and quality goals and punish those who don’t.

Despite the political rumblings at CMS, ACOs have proven their potential to reduce costs. Experience has illustrated that the longer ACOs operate, the more savings they achieve. That’s why it’s important that the ACO experiment continues to run its course, even as more downside risk emerges on the horizon. As ACOs continue down the path of value-based care, the lessons they learn could help the rest of the health system as it manages this important transition.

Brett Furst serves as a chief strategy officer of 

, where he leads go-to-market strategy and sales execution to realize Payformance Solutions’ vision of transforming payment transformation in the healthcare industry. He is a senior executive with over 27 years of experience in selling and managing technology solutions in the healthcare, manufacturing and CPG industries. 

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