Think of it as paying for health care services in the same fashion that telecommunication companies bundle Internet, telephone and cable television services together in one package.
That’s the concept of Accountable Care Organizations, a method of paying for health care services that the federal Medicare and state Medicaid programs will be experimenting with under the new health care law.
Hospitals, primary care doctors, specialists and possibly even nursing homes and home care agencies would collaborate in an ACO, which would coordinate care and payment for care of participating patients.
Instead of paying individually for each visit or medical procedure, Medicare or Medicaid would pay a set periodic payment, regardless of the amount of services, to the ACO, which would pass along proportionate payments to participating providers.
The dollar amount of payment per patient likely would vary, depending on factors such a patient’s age and condition.
The annual payment for an elderly patient or diabetic patient, for example, might be higher than for a younger patient with no health problems, said David Kruczlnicki, president and chief executive officer of Glens Falls Hospital.
Some compare the concept to a construction contract, with the ACO having the role of a general contractor and providers that of subcontractors.
"It doesn’t mean you all work for one company. It means you’ve figured out how to collaborate," Kruczlnicki said.
The theory is that there will be increased communication between providers, leading to better care and less duplication of services, such as laboratory tests, that will reduce overall health care costs.
Accountable Care Organizations are just one of many concepts the government will be experimenting with in the coming years in an attempt to reshape the health care system to focus on value rather than volume.
Local health care executives said the new health care reform bill is an incremental step, not the final outcome.
"It’s kind of like the New Deal (under President Franklin Roosevelt)," said Dr. John Rugge, chief executive officer of Hudson Headwaters Health Network. "You try something, and if it doesn’t work, you close it down and try something else."
Kruczlnicki compared the new health care reform law to the first chapter in a draft of a book that is still in the process of being written.
"I don’t think every sentence is finalized. That’s why there’s going to be pilots (experimental projects) and demos," he said.
Rugge said demonstration projects such as ACOs are like "clinical trials," that determine the validity of educated theories.
"The reform bill pushes us to test these measures and see if they work out," he said.
The success of the ACO concept may hinge on patient perception, wrote Kelly Devers and Robert Berenson in 13-page analysis prepared for the Urban Institute and the Robert Wood Johnson Foundation.
Patients will be skeptical if ACOs are viewed as being restrictive and undermining doctor-patient relationships, the way health maintenance organizations were perceived, they wrote.
An ACO is oriented around health care providers, while the HMO concept was oriented around insurance companies, they wrote.
Consumer advocates have some reservations about the concept, said Bob Cohen, policy director for Citizen Action of New York.
If the program is structured to provide incentives for providing quality care, it could be good for patients. But it would be problematic if incentives were designed to restrict access to seeing specialists, he said.
"The verdict is still out on accountable care organizations. It really depends on how they set the incentives in the new law," said Cohen, who also is a spokesman for Health Care for All New York, a coalition of advocacy organizations.
It is not yet clear when, or if, a local ACO might be up and running.
The federal government will test the ACO concept by making grants available to health care providers under a competitive process.
It is not yet known when grants would be available or whether grant programs would be practical, but local health care executives are interested in the concept.
Glens Falls Hospital has been working closely with physicians and specialists since the 1980s, said Paul Scimeca, the hospital’s vice president of physician practice and community health.
"We think we have a really good foundation to put the structure (of an ACO) in to place," he said.
"We would like to explore it and we intend to," Kruczlnicki said.