5 Key Questions on How ACOs Will Function: From Robert Betka at Catalyst Management Advisors

The transition to accountable care organizations and shared savings is looking to be as dramatic as hospitals' shift to DRGs in the early 1980s, says Robert Betka Jr., a consultant with Catalyst Management Advisors in Grand Rapids, Mich. "This is a very exciting time," he says, noting federal authorities, private payors and ultimately ACOs themselves will have to answer some key questions on how the new system will operate. Here are five such questions.

1. How will the ACO be governed? A governing board made up of representatives from each partner would run the ACO. Would seats on the board be distributed based on each partner's significance in the organization? And how would the board interact with the governing boards of each component organization?

2. How does the ACO divide up payments? Initially, each component of the ACO would be paid on a fee-for-service basis and then would share a certain amount of the savings created by the ACO. How would that payment be divided? To determine this, Mr. Betka thinks clinical representatives from each component would have to identify the whole continuum of care for each condition and assign a value for each step in the continuum. For example, bypass surgery would involve surgery, imaging, nursing, rehabilitation and other services, depending on a variety of circumstances. While initially only the shared savings would be apportioned this way, eventually the whole payment would be broken down, Mr. Betka believes. The goal is to pay the ACO one lump sum for the entire episode of care, like a bundled payment, he says.

3. What would be the payment for prevention? ACOs with lower rates of expensive procedures would reward the specific caregivers responsible for this improvement. Mr. Betka this would often involve focusing on what did not occur, such as fewer surgeries due to better preventive care. For example, the shared savings for a lower rate of bypass operations might be apportioned to primary care physicians, cardiologists, dieticians and others who prevented a bypass operation from happening, he says.

4. How would accountability be identified? If there were an inappropriate readmission or a quality problem, would the ACO identify what component was responsible and assign the penalty to that component?

5. What is the role of healthcare IT? Making determinations on how to divide up payments, assign accountability and make care more efficient and safe would require very sophisticated healthcare IT. Computer systems would need to implement cost accounting, identifying the components of patient care and provide decision-support tools to analyze trends. However, only 7 percent of hospitals now have comprehensive electronic medical record systems.