Program designed to improve patient care, cut costs may need new approach to physician reimbursement

July 20, 2015

ANN ARBOR—Accountable Care Organizations, established with a goal to cut health care costs while providing better patient outcomes, might not offer physicians enough incentive to revamp the way they deliver care, a new study says.

The University of Michigan-led research study reported in the Annals of Family Medicine looked at how physicians are paid when treating Medicare patients. It revealed that although those in ACOs were compensated a bit more for quality, there was little difference in the salary mix for providers who participate in the organizations and those that do not.

“Basically what we found is that physicians who were part of ACOs were paid very similarly to those in private payment systems,” said Andrew Ryan, associate professor, Department of Health Management and Policy, U-M School of Public Health. “Our take here is that ACOs may not be providing strong enough incentives for practices to go through the upheaval of changing physician compensation schemes and making other painful changes to their practices,” he said.

It is costly and time consuming to adopt a different compensation and record system, train everyone in a practice to use it and, in some cases, assume extra risk that the patient’s care could exceed the payment provided.

ACOs, authorized under the Affordable Care Act, are made up of groups of doctors, hospitals and other professionals who voluntarily come together to work to improve patient care for the Medicare population. With strong emphases on coordinated and preventative care, the goal is a team approach that makes sure people who need care, particularly the chronically ill, get it when most needed, are not subject to a duplication of services, and are less exposed to medical errors.

This study looked at 632 primary care practices, using data from the National Survey of Physician Organizations. They measured compensation based on salary, productivity, clinical quality or patient experience.

The researchers found that primary care physicians in ACO practices on average received 49 percent of their compensation from salary, 46 percent from productivity, 3.4 percent from quality, and 1.5 percent from other factors. This pattern of compensation was similar to practices that were not in ACOs and did not have substantial risk for primary care costs. In contrast, primary care physicians that were not in ACOs but had substantial risk for primary care costs received nearly 67 percent from salary, 32 percent from productivity, just under 1 percent from quality, and less than half a percent from other factors.

Some research on these new organizations has focused on early indications of success with the goals of cost savings and improved patient care, but the U-M study is the first to look at this particular aspect.

“There’s very little data as to how physicians in these organizations are compensated. We get inside the black box of ACOs in a way other research has not,” Ryan said.

Other authors: Stephen Shortell, University of California Berkeley, and Patricia Ramsay and Lawrence Casalino, Weill Cornell Medical College, New York. Ryan is affiliated with the Institute for Healthcare Policy and Innovation. 


More information: