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Accountable Care Organizations and Medicare Coursework


Medicare and Medicaid are critical health care programs in the US. They have grown to be a vital part of most Americans health care insurance coverage. There is no private health care coverage for older people over 65 years of age. Still, no health care insurance caters for people at the lower end of the income scale. Medicare and Medicaid have filled these gaps.

However, these programs have suffered setbacks due to wasteful spending habits and inefficient delivery systems. The system is unsafe, prone to abuse, wasteful, fragmented, and not patient-centered (Berenson & Rich, 2010; Berwick and Hackbarth, 2012).

How hospitals and physicians are reimbursed under the current Medicare payment mechanism

A Prospective Payment System (PPS) is a system of reimbursing hospitals and physicians based on a predetermined, fixed cost. The system relies on the classifications of certain services in order to derive the payment amount. Reimbursement also differs based on care services provided to the patient, such as rehabilitation, outpatient, hospice, or long-term care among others.

The PPS aimed to motivate health care providers to deliver effective, efficient care with minimal usages of services. The system relies on a flat monthly fee, which caters for all services a patient may require. It acts as an incentive to health care providers, who will strive to provide efficient services for patients in order to save costs.

The Fee-for-service (FFS) payment model differs from the PPS because it encourages health care providers to add needless treatment services to patients. The FFS model includes unbundled and separately paid services (Manchikant, Singh, Caraway, Benyamin and Hirsch, 2011). This model provides an opportunity for physicians and health care providers to “offer quantity rather than quality treatment because compensation depends on the number of services offered” (Manchikant et al., 2011). The FFS is prone to abuse, raises costs of health care, redundant, reduces efficiency, quality of care, and discourages all forms of medical reforms because it is the most popular among health care services. Further, physicians may desist from conducting even necessary procedures because there are no additional payments for such procedures.

How Accountable Care Organizations (ACOs) will be reimbursed under the proposed Medicare ACO rule

The major challenge has been how health care leaders would allocate payment within the ACO group. However, effective approaches can ensure that the system is fair and profitable to all members.

This is the Medicare Shared Savings Program (Medicare ACO) in which physicians and health care providers would get payment after meeting some quality standards and reducing the costs of services. A Medicare ACO may reduce the Medicare costs below the recommended costs. In this case, the Medicare ACO will get a given percentage (up to 60 percent) of the saving. In the first year, a Medicare ACO gets rewarded under 33 quality metrics of the quality of care, while in the second year, the Medicare ACO gets rewarded based on 25 measures of quality care. In the subsequent years, the Medicare ACO must enhance the effectiveness of care services in four critical areas and get saving.

ACO has the freedom to create its own independent system of spending all the shared savings. This is different from the previous system in which there were specific rules on spending all funds allocated. This method offers incentives to service providers to save through quality services and get rewards.

There are also commercial ACOs, which have a similar system of reimbursing hospitals and physicians. However, this relies on Medicare’s FFS rates or productivity. In addition, ACO members can get additional payment if they meet certain levels of quality and cost targets. A commercial ACO also enjoys flexibility and freedom because it can also establish some forms of metrics and measurement thresholds in order to encourage performance-based compensation.

The model may encourage an equal split of savings between the payer and the service provider while commercial ACOs may determine how to share their savings independently. Health care providers and physicians will get benefits from quality services and effective care. The ACO model will ensure cost control incentives. For instance, hospitals and physicians will control their own ACOs and keep away insurers (Patel, 2012). Effective clinical leadership will ensure that the model is successful. This group can make claims as outside beneficiaries (insurers) without imposing hefty fines on ACO funds.

The key to the success of the proposed ACOs

Effective collaboration, transparency, and efficiency

The premise of the ACO model is that a group of health care providers must work together in order to enhance the quality of care and get rewards. As such, all members of a given ACO group must be transparent, work as a team, and share savings in a transparent manner. Members must start the negotiation at the onset of the agreement because sharing of savings is a strong part of the model.

Physicians must also be honest and display integrity when forming a team of ACO members. Teamwork is imperative for the success of the project. Members must recognize the contributions of others in the team.

Members’ responsibilities and task designation

This would enhance accountability, effective service provision, and meet quality standards and cost measures. This helps members to know who should receive payment for a given service. ACO must account for various characteristics of the health care population and cost when offering similar services. This would aid in reducing costs and increasing savings.

Every provider must determine the cost of service in order to develop a fair model of sharing savings and payment. The aim is to identify both costs and profits separately.

Developing Metrics

ACO members must meet the set quality and cost goals in order to receive a share of the saving. ACO members have a saving pool and members must achieve the performance quality in order to get a payout. A payout depends on the ability to meet critical performance metrics. Hence, it is important for members to agree on specific metrics, which they can use to hold themselves accountable. They may use grades, a threshold model, and a complex system that accounts for a given percentage of funds allocated to a physician or a health care facility.

The major difference between the Medicare Advantage plan and the Medicaid Manage Care plan

Approved private companies provide Medicare Advantage Plan, which includes all Part A and Part B benefits. Medicare Advantage Plan may also offer additional coverage, including Part D (prescription drug coverage) (Hurley & Retchin, 2006). Payment for Medicare is a fixed amount to private firms that offer Medicare Advantage Plans. Private firms must adhere to Medicare regulations. There might be out-of-pocket costs, but they differ.

Conversely, in the last 15 years, States have offered a Managed care delivery plan for Medicaid beneficiaries (Hurley & Retchin, 2006). Private firms may provide all or most Medicaid services to beneficiaries. Medicaid does not offer health services to majorities, including the poorest unless they belong to a given group under the program. States have broad control over the program, and they influence groups that could get the coverage. Payments could be directly on a fee-for-service basis or through different payment modes.


Berenson, R., & Rich, E. (2010). . Journal of General Internal Medicine, 25(6), 613– 618. Web.

Berwick, M., and Hackbarth, D. (2012). . JAMA, 307(14), 1513-1516. Web.

Hurley, R. E. & Retchin, S. M. (2006). Medicare and Medicaid Managed Care: A Tale of Two Trajectories. American Journal of Managed Care, 12(1), 40-44.

Manchikant, L., Singh, V., Caraway, D., Benyamin, R., and Hirsch, J. (2011). Medicare Physician Payment Systems: Impact of 2011 Schedule on Interventional Pain Management. Pain Physician, 14, E5-E33.

Patel, K. (2012). Using Innovation to Reform Medicare Physician Payment. Web.

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IvyPanda. (2020, July 23). Accountable Care Organizations and Medicare. Retrieved from https://ivypanda.com/essays/accountable-care-organizations-and-medicare/

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"Accountable Care Organizations and Medicare." IvyPanda, 23 July 2020, ivypanda.com/essays/accountable-care-organizations-and-medicare/.

1. IvyPanda. "Accountable Care Organizations and Medicare." July 23, 2020. https://ivypanda.com/essays/accountable-care-organizations-and-medicare/.


IvyPanda. "Accountable Care Organizations and Medicare." July 23, 2020. https://ivypanda.com/essays/accountable-care-organizations-and-medicare/.


IvyPanda. 2020. "Accountable Care Organizations and Medicare." July 23, 2020. https://ivypanda.com/essays/accountable-care-organizations-and-medicare/.


IvyPanda. (2020) 'Accountable Care Organizations and Medicare'. 23 July.

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