Accountable care ties performance on quality and cost-control targets to financial incentives—potential bonuses and possible losses—for hospitals and medical groups. The new payment model is one of several included in the Patient Protection and Affordable Care Act that seeks to shift Medicare spending toward incentives for results and to stop rewarding providers for the volume of care they provide.
Among the first Medicare accountable care organizations—so-called pioneers created by the Center for Medicare and Medicaid Innovation—some deferred the risk of potential losses until the second year, which began in January. Another Medicare accountable care program, known as shared savings, was scheduled to expand Jan. 1 beyond the 116 ACOs named in 2012.
Hospitals continue to respond to pressure on operating margins from the weak economy, health reform and Medicare cuts scheduled for 2013 with efforts to curb operating expenses. But after years of such efforts, the strategy may prove increasingly difficult to sustain, rating agencies say.
“Fitch (Ratings) believes that the next level of cost reduction within the industry will need to be realized from a change in the care delivery operating model through integrating clinical operations, implementing standardized protocols, coordinating care and managing population healthcare, which will be more difficult to accomplish,” Fitch analysts said in the agency's outlook for not-for-profit hospitals for the coming year. Fitch projects that hospital profits will weaken after 2013.
Hospitals ended 2012 with less certainty over how federal budget talks would end up affecting Medicare payments and the cost of one popular not-for-profit hospital debt market. A last-minute deal by the White House and Congress to avert tax increases and spending cuts scheduled for the new year delayed for two months an up to 2% reduction to Medicare spending.