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Multiplying acronyms indicate the complexity of health care reform

Rochester Business Journal
July 11, 2014

“A mentor is someone who allows you to see the hope inside yourself.”
—Oprah Winfrey

Each of us has had individuals in our lives who have helped us along life’s journey. In my case, as is true with many of you, there are less than a handful of true mentors who have changed the course of my life, both professionally and personally.

One mentor showed up in the first month of my public accounting career with Arthur Andersen. We did not know each other, but for some reason this man took me under his wing and guided me toward a successful career. He could have taken a pass, but he didn’t. Unfortunately, he passed away suddenly late last year before I was able to thank him formally in writing. More about Bruce Carlson later.

One of many things Bruce taught me is the subject for this column: Always speak in a language your audience understands. As many of you know, accountants are not necessarily known for clarity in speaking the language of finance and accounting. Unexplained acronyms are used all too frequently, including terminology known only to those who have studied business and finance.

In today’s health care industry, new acronyms and the structures they represent are flourishing. Everyone knows about physicians, hospitals, insurance companies and surgery. Lately, however, we have the MCO, MSO, ACO, PPS and more. What follows is an explanation of 10 of these acronyms to help you more clearly understand our far too complex health care system.

Readers of this column know that both the federal and state governments are once again making a valiant attempt to reform health care delivery with Obamacare and Medicaid managed care. And, in spite of what many people may say, it does need reform. The U.S. spends twice the amount per capita on health care as many other industrialized nations. In our case, approximately 18 percent of gross domestic product is now devoted to health care and related services.

In this column I offer the first half of a “Top Ten List” of current acronyms to clarify what I describe as the health care “Ball of Confusion.” Many thanks to the Temptations for that 1970 hit.

Some of the following are new to health care, others retreads from earlier reform iterations.

 DSRIP. Everyone has heard the term “Obamacare” used for the legislation officially known as PPACA (Patient Protection and Affordable Care Act). DSRIP is a recent New York State Medicaid reform initiative, the Delivery Service Reform Incentive Program. Under DSRIP, the federal and state governments agreed that up to $8 billion of federal funding would be passed to the state for Medicaid reforms. The DSRIP funding is performance-based and has as a primary objective the reduction of high-cost, facility-based health services such as hospital admissions and emergency room visits.

One of the key performance targets under the DSRIP funding model is a 25 percent reduction in hospital admissions and emergency room visits over the next five years. That’s a tall order, focusing on providing enhanced preventive and community-based services to reduce “avoidable” facility-based services.

 PPS. For the past 30 years, PPS has generally referred to a health care payment methodology known as a “prospective payment system.” Within the past three months, under DSRIP, New York has added to the “Ball of Confusion” by using PPS for “performing provider system.” Under a DSRIP PPS model, a multicounty region of health service providers, led by hospitals and health systems, is expected to restructure and reform our current fragmented delivery system to achieve an integrated system focused on community-based services. The initial applications for regional PPS planning grants were due at the end of June.

If successful, the PPS model, coupled with the federal ACO model described below, will result in massive restructuring of health care providers with a plethora of mergers, affiliations and acquisitions.

 ACO. Under the Affordable Care Act, also known as Obamacare, accountable care organizations are intended to accomplish objectives similar to those of the PPS model. ACO s are generally led by hospitals and health systems in a regional delivery network that is designed to provide coordinated, efficient and appropriate health care to people enrolled in the particular ACO. The ACO and PPS models assume that a coordinated and integrated system will achieve better service quality and outcomes cost-effectively.

These models have spawned another new term, “population health,” which focuses on services and costs for a large group of enrollees as a pool of individuals. The larger the group, the more potential there is for achieving cost reductions for avoidable or unnecessary care. If this sounds like health insurance to you, read on, because, in many ways, it is.

 MCO. Managed care organizations are the current generation of what began in the 1970s as HMOs, health maintenance organizations. The MCO structure requires the linkage and integration of insurance risk with the development of a coordinated group of health care providers, most commonly in an independent provider association or accountable care network—two more terms with acronyms.

 IPA. Originally designed in the 1970s in response to the 1972 HMO Act, individual practice associations were made up of the physicians and clinical service providers operating in private, solo or group practices. While physician and clinical IPAs are still operational, the new iteration of IPA refers to independent provider associations. Service providers in a particular health care sector such as long-term care or home care join to achieve clinical and financial integration; at the same time, they collectively accept some degree of performance-based contracting incentives or financial risk for providing services to a PPS, ACO or MCO group of enrollees.

Next month: ACN and more health care acronyms of the Top 10.

Gerald J. Archibald, a CPA, is a partner in charge of management advisory services at the Bonadio Group and is known for expertise in non-profit and tax-exempt accounting, management and governance. He can be reached at (585) 381-1000 or Download podcasts of his articles at

7/11/14 (c) 2014 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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