ACO Model Risks and Rewards

Posted on February 29, 2012 I Written By

John Lynn is the Founder of the blog network which currently consists of 10 blogs containing over 8000 articles with John having written over 4000 of the articles himself. These EMR and Healthcare IT related articles have been viewed over 16 million times. John also manages Healthcare IT Central and Healthcare IT Today, the leading career Health IT job board and blog. John is co-founder of and John is highly involved in social media, and in addition to his blogs can also be found on Twitter: @techguy and @ehrandhit and LinkedIn.

I haven’t heard a single person say that the ACO (Accountable Care Organization) model is not here to stay. In fact, everyone that I’ve talked to is completely confident that healthcare is heading down the tracks of some sort of quality care model and away from our current fee for service model. The only real question is what form these ACOs are going to take.

With this as background, let’s consider something about ACOs that I haven’t really heard many (if any) people talking about: the risks and reward profiles of being an ACO (or part of an ACO).

I’ll save the detailed list of risks and rewards for a future post, but instead want to highlight how the risks and rewards of an ACO are quite different from our current fee for service model. In our current model, when you provide a service to a patient you have a pretty good idea of what the reward for that service is going to be. Sure, there are intricacies of insurance billing, but for the most part you know what you’re going to be paid for the services you rendered. There’s not very much risk associated with providing that service since the fee for that service is known. We could argue about whether the reward is worth it or not, but in the current model the reward is pretty solidly defined. You don’t get paid more for doing a better knee surgery than someone else. The payment is the same.

The opposite turns out to be the case in a true ACO world. Providers that are caring for a community of people will be rewarded based on the quality of care that they provide that community (at least that’s the idea). That means that providers and ACOs are taking on the risk associated with the care they provide. Bad care = less reimbursement. Better care = more reimbursement. While the associated risk is higher for providers under an ACO, so are the rewards. A provider that provides better care for their community has the possibility of making more money for the care they provided.

As an entrepreneur I must admit that the idea of getting paid more for doing something better than someone else is beautiful. This is even more true in healthcare where I love the idea of a doctor getting paid to really improve my health as opposed to getting paid for services that I may or may not need. Although, I can understand how many doctors might not feel the same way I do. Many doctors aren’t entrepreneurs. They just love medicine and patients. What are these types of doctors to do with this new and evolving ACO model for reimbursement?

I think there is a clear option for doctors that just want to practice medicine without the risk or rewards associated with the ACO model. The way they’ll get around this is likely working for someone else. There’s little doubt that there will be many organizations happy to take on the risk and rewards of the ACO model while paying a physician a salary for their work.

One thing seems clear to me: Providers take on a greater portion of risk in an ACO, but they also have the opportunity to take home a significantly higher net reimbursement.