Obamacare’s ACOs punish hospitals for quality care

Obamacare promised to cut Medicare’s costs by coordinating care among doctors. But the first effort to do so – Obamacare’s Pioneer Accountable Care Organizations – lost $2.6 million.

Now, the administration is trying a “new and improved” version – so-called Next Generation ACOs. Maine’s Beacon Health Network is participating.

But changing the name doesn’t change the truth. ACOs are an expensive failure, and it’s naïve to expect that to change.

ACOs are networks of doctors and hospitals that get a fixed amount of money per patient they treat, rather than billing Medicare per procedure. ACOs receive bonuses if they stay under budget – and pay penalties if they go over.

ACOs were supposed to reduce costs and improve care. But they failed.

Consider Beacon Health’s time as a Pioneer ACO. The network had the second-highest score for patient health – despite an older population than average – and still got fined $2.9 million.

The reason? Under the ACO model, providing good care doesn’t matter; cutting costs does. So Beacon Health can score above-average on patient care but still be fined for exceeding per-patient funding.

Meanwhile, other ACOs scored lower on patient care, yet won bonuses. Banner Health Network, for example, received a lower quality score than Beacon Health in 2014, but still received $18 million.

Next Generation ACOs are the government’s attempt to fix the system. But they don’t address the fundamental problem: ACOs put cost-cutting above patient care.

So, unfortunately, Next Generation ACOs will continue to punish Maine’s health care system and its patients for high-quality care.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top