What ACOs Could Mean for Your Business


ACOs represent an important new entity in healthcare, with potentially significant implications and opportunities for community pharmacies

After its passage, most headlines about the Affordable Care Act (ACA) focused on increased access to health insurance for approximately 30 million Americans who lack it. But an important ACA provision — now getting plenty of attention from major providers (health systems, hospitals, physician practices and even pharmacies) — is the formation of Accountable Care Organizations (ACOs).

What’s an ACO?

Within the 2,400 pages of the ACA is the basic idea for accountable care organizations, defined by the government as “a group of healthcare providers who give coordinated care, chronic disease management, and thereby improve the quality of care that patients get.”[i] Basically, the goal for an ACO is to improve care and control costs by providing financial incentives to healthcare providers to deliver more coordinated, higher-quality, lower-cost care. An ACO’s payment is tied to achieving healthcare quality goals and outcomes that result in cost savings. A fact sheet on ACOs provides more information.

How Many People Are Affected?

Providers of all types, especially health systems, hospitals, and major physician groups, have started to form ACOs where they commit to care for “populations” of at least 5,000 patients. As of January 2013, there were 259 Medicare ACOs across America, providing care to about 4 million Medicare beneficiaries. And at least another 170 ACOs have been formed to provide coordinated care for patients with private insurance. In total, there are already about 40 million patients in organizations with ACO arrangements. Consulting firm Oliver Wyman estimates that 52% of the U.S. population lives in areas served by an ACO.[ii] These numbers are expected to continue to grow.

What Are ACOs Focused On?

As ACOs seek to improve the coordination of care, improve the quality of care, and control costs, they are focused on a few major areas that pharmacy could affect:

  • Hospital readmissions. Medicare providers, including ACOs, can be penalized with lower reimbursement if they have high readmission rates within 30 days of a hospital discharge. As a result, hospitals and health systems are extremely focused on preventing unnecessary readmissions, which means keeping discharged patients from needing to come back to the hospital.Short-term readmissions are often related to drugs. Patients may not fill important prescriptions or may not take their drugs properly — often because they lacked understanding about their prescriptions.
  • Patient experience and satisfaction. Going forward, hospitals’ reimbursement may be affected by how patients rate their overall care experience. A key part of a patient’s experience — which can affect their perception of care — is the transition from the hospital back to their home. When community pharmacies are involved, they can help ensure a smooth transition, which can affect a patient’s experience and perception of care.
  • Partnerships. As major healthcare providers form ACOs, they recognize that they can’t provide all healthcare services themselves. So, they are creating partnerships and networks with other providers in the community, who often serve as “contractors” to the ACO. Since drugs are such an important part of the treatment process for so many patients, it is important for community pharmacies to be included in coordinating care for a population of patients.

What It Could Mean for Community Pharmacies

Pharmacies have the ability to help ACOs deliver on their overall goals of improving the quality of care and controlling the costs of healthcare, and the specific goals of reducing readmissions and ensuring a smooth transition from hospital to home. It is therefore important for pharmacies to be aware of and possibly to be a part of these important new entities.

For community pharmacies, aligning with local ACOs (as contractors of services) represents a potential opportunity. Pharmacies can work with ACOs on transitions and can provide important clinical services such as medication reconciliation, medication therapy management, counseling and education to help improve drug adherence, and even vaccinations. (Walgreens sees an opportunity here and recently announced a program called WellTransitions to target this opportunity;[iii] a similar opportunity exists for independent community pharmacies.) Such opportunities could increase customers, traffic and revenues through new services.

For community pharmacies to provide services to an ACO, it requires them to focus on a few important areas:

  • Being seen as a partner. Most ACOs have been formed by health systems, hospitals, and large physician groups, which are taking on medical and in some cases financial responsibility for delivering care to a patient population. To provide comprehensive, coordinated care, ACOs are contracting with complementary providers to help care for patients across the continuum of care. Since the entities forming ACOs can’t deliver all care themselves, they are looking for partners and contractors. It can be important for a community pharmacy to proactively connect with an ACO to make the ACO aware of the pharmacy’s expertise and the services the pharmacy and pharmacists can offer. Community pharmacies have a great value proposition that can be meaningful to an ACO’s success. Community pharmacists should be proactive in telling this story and should consider whether it makes sense for your business to forge relationships with local ACOs. You may already know the healthcare providers in your community that have formed an ACO or are planning to do so. This link to CMS lists the Medicare ACOs that have been announced.
  • Having expertise in medication reconciliation, MTM and other clinical services. To become a valued partner that an ACO will enlist and rely on for various services, it is important for the ACO to see the community pharmacy as a community-based clinical resource. Having expertise and capabilities in areas such as medication reconciliation, medication therapy management and providing counseling related to drug adherence can help. These are important capabilities that can help address readmissions and help the ACO effectively manage the health of patients with chronic diseases. These are also community-based capabilities that may be lacking for many hospital-based ACOs.
  • Being integrated with a local ACO. For an ACO to achieve its desired goals it requires coordination, which requires some level of technical integration and information sharing. For a community pharmacy to work efficiently with an ACO, it is likely that some form of technological integration may be necessary so that information can be accessed and shared. This may require new technology and training.

The Bottom Line

As ACOs continue to take root, the healthcare providers that are forming them are seeking partners and contractors who can help them improve the quality of care they provide, and can do so efficiently to help them control costs. Community pharmacies and pharmacists can play an important role in helping to ensure that prescriptions are filled and adhered to. But partnering with an ACO won’t necessarily be easy. It may entail forming new types of relationships, adding new services and capabilities, and being integrated with the ACO for information sharing.

Whenever there are significant changes in an industry, there is always uncertainty, but there are also new opportunities. While acknowledging the uncertainty that exists, community pharmacies should explore the opportunity that ACOs represent. The next few years will be about learning, adding capabilities and forming new types of relationships.

[i] HealthCare.gov

[ii] “New ACOs Serve More Patients Throughout the Country,” Drug Topics, February 20, 2013, http://drugtopics.modernmedicine.com/drug-topics/news/drug-topics/reform/new-acos-serve-more-patients-throughout-country.

[iii] Daniel Weiss, “Walgreens Program Employs Pharmacists to Reduce Hospital Readmissions,” Pharmacy Times, November 30, 2012, http://www.pharmacytimes.com/news/Walgreens-Program-Employs-Pharmacists-to-Reduce-Hospital-Readmissions.

Note: Pharmacies cannot establish an ACO on their own because they do not bill Medicare for primary care services. Medicare-enrolled pharmacies, however, can join with other Medicare-enrolled providers or suppliers who bill Medicare directly for primary care services in order to form ACOs.

Note: While all information is believed to be reliable at the time of writing, the information provided here is for reference use only and does not constitute the rendering of legal, financial, legislative, commercial, or other professional advice by McKesson. Readers should consult appropriate professionals for advice and assistance prior to making important decisions regarding their business.