Thursday, March 31, 2011

Evaluating the Medicare Pilot Programs: Comparing ACOs and Bundled Payments

The Patient Protection and Affordable Care Act health reform legislation created several new types of provider arrangements that many hospitals and physician groups are evaluating. These organizational structures are intended to enhance the ability of hospitals, physicians and other types of providers to work together to enhance quality and reduce costs.

Of these structures, accountable care organizations, or ACOs, have received the most notice. Conferences on ACOs are sold out; newsletters about ACOs are oversubscribed, and virtually every healthcare meeting has at least one speaker on ACOs. Consultants are begging hospitals to form ACOs before their competitors do, warning of precipitous losses in admissions to competing hospitals that have formed ACOs.

The other new provider arrangement is gaining significantly less attention. The bundled payment pilot program allows hospitals to work with physicians to reduce costs, and to pass along some of the cost savings back to the physicians. While far less grandiose that an ACO, participation in the bundled payment project may entail less risk and yield for better results for some hospitals. Since an organization cannot participate in both programs, it is important for hospitals to evaluate both alternatives before committing to either of them.

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