Here is a short and simple explanation of how the Accountable Care Organization finances are supposed to work under Medicare. Read it closely.
What I see is if a group of doctors previously billed Medicare $100,000, but through better management of health care (efficiency/productivity) they now bill $80,000 they get to share in the $20,000 saved for Medicare. Let’s say they share half so now their income is $90,000 rather than $100,000 while Medicare saved $10,000. To receive $10,00 less in income the physicians must also comply with complex regulations and reporting requirements. And the incentive for physicians to lose money is what⁉️ I keep thinking I’m missing something in this equation. If you know what it is, let the rest of us in on the secret.
Sharing in the Savings
The way a “shared savings” ACO works is that, if a group of providers lowers its Medicare billings by a predetermined amount, then that ACO will share in some of those savings with Medicare. In the Pioneer model — one of two “shared savings” ACO programs in Medicare — participating ACOs can take a higher share of the savings if they lower costs, but if their billings rise instead, they lose money.
The rules of the Pioneer model proved to be too difficult for some plans; in 2013, nine of the 32 ACOs in the program left, with seven of them moving to CMS’ Medicare Shared Savings Program (MSSP), which is less risky financially. On the other hand, in 2012, 13 of the ACOs reaped a total of $87.6 million in savings, with Medicare taking an additional $33 million.
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