What's Happening in Accountable Care Organizations

By Matthew Wolf |

Health systems will rely on pharmacies to help drive and support ACO activities.

The accountable care organization (ACO) model fits within a labor-, operational- and capital-intensive process that hospitals and health systems will have to understand and implement as they shift from fee-for-service to fee-for-value reimbursement.

As the name suggests, ACOs hold providers accountable for overall quality and total cost of care1 for patient populations over time. ACOs emphasize treatment of chronically ill patients in the outpatient environment—rather than at the most costly site of care, the hospital. 

A fast-approaching target: The U.S. Department of Health and Human Services (HHS) has set a goal for 50 percent of Medicare payments to come from alternative payment models such as ACOs by 2018.2 Along this timeline of value-based reimbursement, healthcare organizations have nearly reached a staging point where even those resistant to change will soon be forced to change.

How will this play out?

Nearly 840 ACOs operate among public and private payers,3 with most of the U.S. population living within an ACO service area.4

ACOs put a lot of money at stake aligning physicians, health systems and insurers as partners in payment for coordinated care. HHS reports net program savings of $411 million in 2014 among 353 Medicare Shared Savings and Pioneer ACOs.5 

However, ACO participation does not guarantee success.It requires a cultural change to the value-based mindset along with significant investments in technology and human resources. For example, electronic health records (EHRs) must be interoperable with internal IT systems and those of external partners, while data-analysis tools stratify and segment out patient populations for chronic disease management. Hospitals and health systems also need specialized professionals—such as navigators, caseworkers, disease state managers and pharmacists—to continuously interact with high-risk patients.

Those are daunting requirements, especially for capital- and resource-strapped small and mid-level hospitals. Accordingly, the ACO movement will likely broaden merger and acquisition activity, with large health systems looking to expand and smaller facilities seeking partners who can help them survive in their role at the community level.

Opportunities for health system pharmacies.

As health systems focus their delivery network on ambulatory and preventive services beyond their traditional campuses, they will rely on a coordinated ambulatory pharmacy strategy to help control the care continuum, grow revenue and improve service quality.

Medications, in particular, are essential to the overall management of patients in any value-based model, including ACOs. We know that 20 percent of hospital readmissions are medication-related.6 On the inpatient side, patients’ medications must be properly reconciled upon admission. There’s also a need to ensure patients receive discharge prescriptions and understand their medications upon discharge so that they are more likely to adhere to their regimen. 

Industry-leading, hospital supported ambulatory pharmacy strategies not only establish pharmacists as key contributors on the clinical team, but also institute a continuous, integrated, medication-focused program that helps keep patients engaged with proactive and interactive methodologies to improve adherence. An effective hospital-supported ambulatory pharmacy can also produce new revenue by serving as the prescription “hub” for discharge patients (e.g., inpatient, emergency department, clinic and surgery discharges) and employees. Moreover, revenue from the ambulatory pharmacy service line helps subsidize significant cost increases (e.g., for specialty drugs) seen in the inpatient pharmacy.

Patient outcomes and experiences will improve as well through implementation of offerings such as concierge prescription services and medication therapy management, which in ambulatory settings can increase adherence by more than 20 percent in certain disease groups.7

Moving in the right direction.

Hospitals and health systems, like most large organizations, tend to be departmentally siloed.  Furthermore, with payment reform and reimbursement reductions, most hospitals and health systems are capital-constrained and forced to manage by reaction. But overall, they have a vested interest in developing a strategy for value-based care that includes an ambulatory pharmacy strategy.

Meanwhile, the profession of pharmacy has an opportunity to play a pivotal part in healthcare’s new paradigm as it relates to transitional care and population health. Pharmacy’s role in clinical care will only become more crucial as the next iteration of accountable care—bundled payments—begins to roll out from government and commercial payers.


1. The field guide to Medicare payment innovation. The Advisory Board Company. 2015. Accessed October 2016. Available online at https://www.advisory.com/-/media/Advisory-com/Research/HCAB/Resources/2015/Field-guide/31183_HCAB_New_Field_Guide_IG.pdf
2. HHS sets clear goals and timeline for shifting Medicare reimbursements from volume to value. U.S. Department of Health and Human Services. 26 January 2015. Accessed October 2016. Available online at http://www.hhs.gov/about/news/2015/01/26/better-smarter-healthier-in-historic-announcement-hhs-sets-clear-goals-and-timeline-for-shifting-medicare-reimbursements-from-volume-to-value.html
3. Accountable care organizations in 2016: private and public-sector growth and dispersion. Health Affairs. 21 April 2016. Accessed October 2016. Available online at http://healthaffairs.org/blog/2016/04/21/accountable-care-organizations-in-2016-private-and-public-sector-growth-and-dispersion/
4. Accountable care organizations in the United States: market and demographic factors associated with formation. Health Services Research. December 2013. Accessed October 2016. Available online at https://www.ncbi.nlm.nih.gov/pubmed/24117222
5. New hospitals and health care providers join successful, cutting-edge federal initiative that cuts costs and puts patients at the center of their care. U.S. Department of Health and Human Services. 11 January 2016. Accessed October 2016. Available online at http://www.hhs.gov/about/news/2016/01/11/new-hospitals-and-health-care-providers-join-successful-cutting-edge-federal-initiative.html
6. 5 things CEOs need to know about pharmacy. The Advisory Board Company. August 2016. Accessed October 2016. Available online at https://www.advisory.com/research/health-care-advisory-board/blogs/at-the-helm/2016/08/ceos-need-to-know-pharmacy
7. 6 ways your pharmacist can save the day: Improve patient outcomes and reduce overall health care spending. The Advisory Board Company. 2016. Accessed October 2016. Available online at https://www.advisory.com/-/media/Advisory-com/Research/PEF/Multimedia/2016/32793_PEF_Pharmacist_Role_IG_Web.pdf

About the Author

Matthew Wolf

Senior Vice President, Business Development, Health Systems and Specialty Solutions
View Bio