ACO or PCMH: Making a crucial decision for your practice

How to weigh the risk and the benefits to your practice of these care delivery and payment models

February 04, 2015

Is becoming a patient-centered medical home (PCMH) and/or affiliating with anaccountable care organization (ACO) right for my practice? It’s a question that many primary care physicians find themselves asking as they struggle with rising costs, stagnant reimbursements, and frustration with a payment system that rewards volume of services over outcome quality.

Because the PCMH and ACO share common goals of lowering costs and improving patient outcomes, physicians often think of them interchangeably. But they differ in that a PCMH is an approach to care for an individual practice, whereas an ACO is a method of reimbursing a network of providers. “Basically, the PCMH is a care delivery mechanism, while the ACO is a payment mechanism,” explains David Gans, FACMPE, senior industry affairs fellow with the Medical Group Management Association (MGMA).

Related: Private payers re-examining reimbursement

Both approaches also require patience and determination—as well as substantial resources to implement and to make function effectively. So it is important to understand both concepts before deciding which—if either—is right for your practice. Of the two, the PCMH model has been around the longest. First articulated in the late 1960s by the American Academy of Pediatrics (AAP), today the term has somewhat different meanings depending on who is using it. In general, however, PCMH describes a practice that:

  • treats patients holistically,
  • provides patients with extended access to providers,
  • provides team-based care,
  • effectively coordinates care with other providers,
  • focuses on quality and safety, and
  • engages patients in their own care

A 2014 study by the Medical Group Management Association found that many organizations and payers have created standards for designating a practice as a PCMH, but only four—the Accreditation Association for Ambulatory Health Care, the Joint Commission, the National Committee for Quality Assurance, andURAC had PCMH programs that were national in scope, PCMH-specific, had a published set of standards, and were used widely as a model PCMH.

Whereas the PCMH approach to care is practice-specific, an ACO requires coordination—if not outright affiliation—among multiple practices to lower costs and improve outcomes. Under an ACO, providers receive a pre-determined payment to care for, and meet quality targets, for a designated patient population. If the ACO can meet the targets for less than the payment, it keeps the difference. If it exceeds the payment, the ACO is responsible for the difference.

Growth of ACOs

The idea behind the ACO is to improve coordination among the clinicians and institutions delivering care to a designated group of patients, thereby improving quality and lowering costs, says Chuck Peck, MD, managing director with Navigant Healthcare consultants and interim chief executive officer of theAthens Regional Medical Center in Athens, Georgia.

“Most patients get care from more than one physician,” Peck says. “So the question is, how do you get the providers thinking in terms of teamwork and making sure that everyone caring for that patient is focused on outcomes, and doing it in a financially accountable way?”

While commercial payers are beginning to experiment with ACOs among their provider panels, the main catalyst for their development thus far has been Medicare, through the establishment of its Shared Savings and Pioneer ACO programs.

The Centers for Medicare & Medicaid Services says that as of December 2014 424 ACOs, serving about 7.8 million beneficiaries, were participating in Medicare’s Shared Savings program. A recent study by the consulting firm Oliver Wyman estimated that public and private ACOs together provide care to between 25 million and 31 million people.

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