Understanding risk in accountable care organisations

The US healthcare system is in the midst of a transition from reimbursement based on the volume of services to that based on the value and quality of services provided to patients. Accountable care organisations (ACOs), or groups of providers that come together to meet certain financial and care quality goals, are illustrative of this movement. This paper presents two prerequisites for a successful Medicare ACO, which serves aged and disabled beneficiaries. First, an ACO makes strategic use of population health techniques, including advanced primary care and nurse-led services such as annual wellness visits (AWV) and data-driven chronic care management (CCM). Second, an ACO must achieve significant scale to avoid unexplained swings in year-to-year savings and losses. The paper demonstrates that, in spite of early success, rural ACOs face additional challenges, including a strong aversion to risk in light of their economic fragility and community-based governance and random pricing inaccuracies created by cost-based reimbursement.