Top Performing ACOs Save — and Share — Millions

February 2, 2015

Accountable Care Organizations (ACOs) have been making headlines as a relatively new option for reducing health care costs. ACOs do this by forming regional or local groups of medical providers — doctors, hospitals, clinics — who provide coordinated health care.

This coordination is designed to result in higher quality of care for patients by increasing communication between specialists, primary care providers, and other caregivers. It also can lower the cost of care by reducing duplicate tests and catching conditions early that, if left untreated, could develop into more costly chronic diseases.

As an incentive to form ACOs, the Centers for Medicare and Medicaid Services (CMS) shares the savings achieved for the Medicare program with ACOs that succeed in delivering high-quality care at a lower cost.

Since ACOs were authorized in 2010, nearly 400 have been formed. However, in the only analysis of results by CMS thus far, just 29 ACOs qualified for the bonus pay. Still, the payouts are impressive. As a chart published in CFO Magazine in December 2014 shows, the top bonus was $57.8 million with bonuses paid to the second- through fifteenth-ranked ACOs ranging from $39.6 million to $15.1 million.

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These figures underscore both how difficult it is to improve health outcomes while reducing costs and the promise of ACOs as one method for doing so.

ACOs are not the only new policies Medicare has introduced to encourage coordinated care, however. In October 2014, Medicare introduced a policy that would reimburse doctors for providing coordinated care to Medicare-recipients with chronic conditions. In January 2015, the Obama administration announced its goals of having 30% of payments for traditional Medicare benefits tied to alternative payment models such as ACOs by the end of 2016 and 50% by the end of 2018.

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