One part of the Patient Protection and Affordable Care Actthat's hit American health care like the British Invasion areaffordable care organizations, or ACOs. At first, there were just afew, then some more and now they're all over the place, just as TheBeatles, The Rolling Stones, the Who, the Kinks and other groupstook over American pop culture in the 1960s.

In an ACO, doctors, hospitals, Medicare, providers and patientscome together like John, Paul, George and Ringo to coordinatehealth care with the idea of improving quality and reducing costs.When PPACA was passed, ACOs were touted as a way to lower healthcare expenditures under Medicare and encourage collaborative careamong providers. ACOs now have been around long enough to quantifysome results of their efforts, even though the transition hasn'tbeen easy. By all appearances, ACOs are going to be around while sobenefits brokers and agents should possess a better understandingof ACOs to better serve clients and beneficiaries.

“It's not new to health care reform; the concept predates PPACA,but PPACA was really the accelerant to it and put the pilotprograms in place,” says Warren Skea, director of PricewaterhouseCoopers' Health Enterprise Growth Practice.

Today's Landscape

While a few ACOs were in place before 2010, the number of ACOsreached more than 400 in 2014, with some estimates placing thenumber at more than 600. And, according to the Kaiser Family Foundation, about 14 percent of the population iscovered by an ACO arrangement.

The Centers for Medicare andMedicaid Services in January released a statement that toutedthe findings of an ACO savings analysis. The analysis said thatmore than 50 ACOs had managed to save about $380 million. Thatanalysis also said that half of the ACOs that started in in 2012had already managed to lower costs.

“These innovative programs are showing encouraging initialresults, while providing valuable lessons as we strive to improveour nation's health care delivery system,” said Kathleen Sebelius,secretary of health and human services, at the time. “Organizationsof various sizes and structures across the country are working withtheir physicians and engaging with patients to better coordinateand deliver high-quality care while reducing expendituregrowth.”

More and more health care providers are joining ACOs, too.Regional and local hospitals, physician groups, independentphysicians associations and nonprofits are well represented in ACOagreements across the country. Some very large players in thehealth care began exploring ACOs before PPACA, such as Aetna, andothers have gotten into the game as well, including Blue Cross andAnthem.

A New Model

An ACO is basically a different model for the delivery andpayment of healthcare services. In an ACO, providers arecompensated by keeping patients healthy, reducing inefficiency andredundancy and implementing preventative medicine initiatives.Traditionally, health care used a fee-for-service model, which canlead to unnecessary tests, procedures or therapies.

While an ACO can still charge for services, the payers andproviders voluntarily work together to coordinate care, which meansa particular test, for example, gets shared within an ACO and notrepeated by another doctor or hospital. ACOs are required by law tomeet 33 quality standards, treat chronic conditions and can bepenalized for not meeting efficiency and quality requirements. TheACO essentially works under Medicare, which serves as the primarypayer with public and private healthcare providers responsible forproviding care.

“I had one client tell me, 'Warren, this is new and we do haveto have new skill sets. One floor below us, I have a whole floor ofbiostatisticians and actuaries and a few years ago, I would neverhave needed those individuals,'” says Skea. “It's very differentfrom the old model. There will be those that can make the leap andmanage it but for others it's very different—for executives andphysicians alike.”

The CMS defines three different types of ACOs. The Pioneer ACOModel was designed for early adopters of coordinated care. MostACOs operate under the Medicare Shared Savings Program, whichallows for traditional fee-for-service providers to shift from thatmodel of healthcare payment to the ACO model and share in thesavings. Lastly there's the Advance Payment ACO, which is basicallyan incentive program for some ACOs in the Medicare Shared SavingsProgram.

“If you've seen one ACO, you've seen one ACO,” Skea says. “Idon't think there's one model or blueprint for getting an ACO upand going. And that's somewhat by design. Even though there's a lotof issues that are common, healthcare is still practiced andreceived locally. The organizational aspects and the market aspectsare very local. One in Western Colorado will look different fromone in New York and that will be different from one in Floridabecause of the participants. This model turns traditionalfee-for-service on its head. You're changing the reimbursementmodel.”

ACO skeptics have been quick to point out the similarities tohealth maintenance organizations. There's one key difference,though. Patients aren't required to stay within a network to getcare.

Inside an ACO

Aetna began Accountable CareSolutions back in 2007—before PPACA—when the company begancoordinating care for its Medicare Advantage members. Aetna foundthat decreasing duplicate or unnecessary services not only improvedoutcomes but their members required 43 percent less acute hospitalcare in 2010. Aetna then expanded the model to physician groups,hospitals and providers.

Now, Aetna has care agreements with 36 health systems andproviders across the nation and covers 550,000 people under an ACO.By the end of 2014, Aetna expects to have 850,000 members inaccountable care arrangements and 20 percent to 25 percent of theirmedical costs coming from a value-based network.

While Aetna's ACO arrangements have been successful and seempoised for growth, it wasn't an easy transition to make, says GaryThomas, chief operating officer for Accountable Care Solutions.

“While every organization we work with faces a unique set ofchallenges, there are some common obstacles that most providersface when transitioning to an ACO model,” Thomas says. “The firstis managing the cultural change required to make the transformationto value-driven care. Organizational leadership must be able tosuccessfully communicate the vision, attain buy-in at all levelsand be willing to invest in the change. Change management effortsare much more successful if the organizational culture supportscollaboration and openness to new ideas.

Thomas adds that another challenge in moving to an ACO isincorporating technology that encourages collaboration across caresettings and allows medical professionals better access toinformation. Thomas adds that many electronic health recordsprograms were developed in a fee-for-service world, not an ACOone.

Aetna's collaboration with Banner Health Network in Phoenix,among others, is showing measurable cost savings, includingreductions in hospital admissions, length of stay and readmissions.Across patient populations served by Banner in 2012, here are someof the year-over-year improvements:

• 3 percent to 5.5 percent medical cost savings over prior 12months

• 1 percent to 8 percent increase in primary care providervisits

• 7 percent to 8 percent reduction in hospital admissions

“These results not only quantify cost reductions but they alsospeak to improvements in quality and care coordination, such asreductions in avoidable hospitalizations and readmissions,” Thomassays. “Banner was able to reduce costs for individuals andemployers as well through Aetna Whole Health, a health plan productit launched with Aetna based on the ACO network. The productutilizes plan designs that allow individuals and employers to takefull advantage of the results listed above.”

For Brokers, Agents

It looks like ACOs are here to stay, so it's important forbenefits professionals to be familiar with how they work—and howthey reduce costs. Any broker or agent needs to be an expert in allhealthcare options in a nation under PPACA, after all, they mighthear questions from an HR person, CEO or even patientsthemselves.

“Through our co-branded health plans, we work jointly with theACO provider to market the health plans and educate consumers aboutthe additional benefits they receive by being part of an ACO plan,”Thomas says. “We also offer a variety of care management andpatient engagement tools to help enhance the overall patientexperience. For example, we provide smartphone apps that simplifyday-to-day tasks like finding a doctor or scheduling anappointment, resulting in more convenient, personalizedinteractions. Likewise, our care management tools help to simplifythe care of chronic conditions at home, which both strengthens thedoctor-patient relationship and builds loyalty for the ACO.”

Whether ACOs have a lasting legacy like lads from Liverpoolremains to be seen. But for now, they appear to be on a long andwinding road.