An Accountable Care Organization (ACO) is a health system where providers—doctors, hospitals, etc.—agree to align financial incentives with better health for a particular population. ACOs come in various flavors, but one particularly disruptive ACO business model is capitation. In capitated systems, organizations receive a fixed payment for delivering care, which means that they accept the financial risk for managing the costs of their covered population. Doctors who successfully control the costs of their patients get to pocket the difference between the fixed payments and their patients’ costs. This type of system ultimately profits by unleashing entrepreneurial innovation towards lowering health care costs.
Obamacare makes some provisions for ACOs, which is an important reminder that some parts of the law show a promising openness to real reform. However, as Gupta notes, there haven’t yet been enough ACO trials to know if they will actually work as the theory behind them predicts (a point Stephen Davidson expands on in his book on the ACA). These kind of organizations are still in the experimental phase, which makes Obamacare’s embrace of them premature. This may turn out to be (yet another) challenge for Obamacare’s implementation.Still, ACO’s look to have a lot of potential, paired alongside the other reforms and innovations that are on the horizon. Gupta gives a good guide for readers interested in what they are and what they can do.