As the crisis in the healthcare industry continues to deepen, healthcare has dominated the news for some time now and will likely dominate for years to come. Despite recent legislative efforts to reform healthcare, the fact is there are still many challenges to a system where payments for the most vital and important service most people will ever interact with are tied to nothing more than stock dividends and profits.

Healthcare costs are not only incredibly high, but they aren’t rooted in reality. This can be attested by anyone who has received an itemized hospital bill. The tiniest details of a hospital stay can result to enormous costs.

Despite being relatively inexpensive to produce, it’s not uncommon for prescription drugs to cost immense sums. The vision to see new paradigms and guide the various players in the healthcare arena towards them is what’s needed for true healthcare reform.

The Accountable Care Organization

One such paradigm is the Accountable Care Organization, or ACO. An ACO is a healthcare entity that ties payments to quality metrics, holding itself accountable for the quality of medical care, of customer service, and of overall experience in a facility or system. It’s an idea that represents one of the most rational solutions to the atmosphere of secrecy and inflation that governs medical costs in this country. How can any reform take place when no one can even explain how costs are calculated for many medical services and equipment?

In the future of healthcare provided by ACOs, the idea of itemized hospital bills will be as outdated as the fee for service system. The ACO which contains the hospital will be paid not for the hospitalization itself, but for the risks associated with all the care of a patient of whatever nature. Thus, the fact that the ACO/hospital may have provided a particular service is not the cause for a bill. There will be no need for a bill to an insurer or the patient allocating direct and indirect costs to a single aspirin or procedure because the ACO/hospital will have already been paid a bundled payment for that patient for the year.

The fact that today, a hospital may bill $2 for an aspirin simply reflects the need of the hospital to recover all of its direct costs and overhead, patient by patient. Although the aspirin itself does not cost $2, in the context of a 7 day hospital stay, accounting needs require allocations which result in nonsensical results. And that is why our entire payment system for healthcare needs reforming.

The ACO model also allows both patients and third-party payers (insurers) to monitor and feedback on the quality of the care they are receiving, with costs tied directly to that feedback. This creates an incentive for all parties involved in a patient’s care to extend their best possible service. Furthermore, it establishes something sorely missing from the current healthcare environment: consequences.

Healthcare reform is coming one way or another. Now is the time for all parties involved to decide the form they’d like to see it take.