ACOs Appear Unable to Incentivize Physicians to Limit Costs

Lara C. Pullen, PhD

July 31, 2015

Practices in affordable care organizations (ACOs) provide a slightly higher compensation for quality when compared with practices at large. Both ACO and non-ACO practices are similar, however, in regard to compensation based on productivity and salary. This suggests that the incentives for ACOs may not be strong enough to encourage practices to change physician compensation policies.

ACOs were created by the US Patient Protection and Affordable Care Act. They are intended to manage patients through a continuum of care.

It is not yet clear, however, what sort of compensation arrangement should be made between the ACO and primary care physicians. Specifically, the question remains as to how practices in ACOs should pay primary care physicians to incentivize meeting quality measures while at the same time constraining costs.

Andrew M. Ryan, PhD, from the University of Michigan in Ann Arbor and colleagues addressed the current state of compensation by ACOs in their analysis of a national survey of physician practices published in the July/August issue of the Annals of Family Medicine. They examined whether practices in ACOs use compensation policies that are different from non-ACO practices that assume substantial risk for primary care costs.

The researchers found that compensation for primary care physicians varied a great deal across study practices. The variation in primary care physicians' compensation from salary was independent, however, from participation in an ACO practice.

Physicians in both ACO and non-ACO practices who do not have substantial risk for costs tend to receive one half of their compensation from salary, less than one half from productivity, and approximately 5% from quality and other factors.

In contrast, physicians not in ACOs who have substantial risk for primary care cost received two thirds of their compensation from salary, almost one third from productivity, and approximately 1% from quality and other factors.

The investigators concluded that the variations in primary care compensation likely reflect the different incentives faced by practices. Moreover, the incentives for ACOs do not appear to be strong enough to cause practices to change their physician compensation policies to incentivize better patient experience, improved patient health, and lower per capita costs.

The authors have disclosed no relevant financial relationships.

Ann Fam Med. 2015;13:321-324. Full text

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