Paying Doctors to Shun Hospitals

In an attempt to tame growing Medicare costs, the Affordable Care Act encourages doctors and hospitals to form groups called accountable care organizations, or ACOs. The idea is to get doctors, hospitals, nursing homes, and other providers to work together to treat Medicare patients. They’re supposed to avoid unneeded or redundant procedures and emphasize preventive care and chronic-disease management. These alliances typically invest in electronic health records to track patient treatments and hire social workers to make sure patients take their medication and don’t miss checkups. In exchange for lowering Medicare’s bills, ACOs get to keep a portion of the savings.

Three years into the voluntary program, 367 groups of health-care providers nationwide have formed ACOs. They’re responsible for 5.3 million Medicare patients, or about one in eight people on the federal insurance program for Americans 65 and older. Some 115,000 doctors in the U.S. are involved in a Medicare ACO in some way, according to data from Leavitt Partners, a consulting firm. Doctors forming an ACO generally create a new corporate entity responsible for their Medicare patients, but most stop short of merging their practices entirely. The first class of 137 ACOs, formed in 2012, has saved $380 million over the first year, Medicare announced on Jan. 30.