The encyclopedia · Finance & Accounting · Financial decision · 2012-2024
Medicare ACOs let providers keep part of the savings they create.
Accountable care organizations make groups of providers responsible for a whole patient population and let them share the savings if they beat a cost benchmark.
Centers for Medicare & Medicaid Services · U.S. provider groups
the move
Traditional fee-for-service paid a doctor for each visit, so no one owned the cost or quality of a patient's care across providers.
The Affordable Care Act created accountable care organizations: provider groups that take responsibility for the cost and quality of a defined population, with a benchmark set from historical spending.
In the Shared Savings Program an ACO that delivers care below the benchmark while hitting quality measures keeps a share of the difference, aligning the payment with the patient's whole episode.
why it works
- Shared savings rewards keeping costs down rather than generating volume
- Quality gates stop the savings from coming at the expense of care
- Providers coordinate because they are financially joined
- It transplants managed-care incentives onto independent practice
what transfers
If you want providers to manage the whole patient, pay them for the whole patient — set a benchmark and let them share the savings below it.
what came after
Participation grew each year, and in 2024 about 480 Medicare Shared Savings Program ACOs covered millions of beneficiaries, but results varied and some studies found modest savings, so the model was repeatedly tweaked to push providers to take on more financial risk.
references
- Medicare ACO participation grows in 2024: CMS
- Participation Continues to Grow in CMS' Accountable Care Organization Initiatives in 2024
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