Consider the following case study:

You are the chief executive officer of a large, technology-intensive hospital in a community of 200,000 people. The community includes two other, smaller community hospitals and a wide range of physicians and other providers working in private practice. Medicare, the federal insurance program for the elderly, currently pays you a fixed amount for every eligible admission to your hospital, based on the severity of the patient’s needs. Physicians and other providers in your community are paid fee-for-service.

The federal government has offered to form an ACO in your community that could accept a capitated annual payment for each person eligible for Medicare. (Adapted from Knickman & Kovner, 2015, p. 251)

To Join or Not To Join?

Q1. How would you go about deciding whether to accept the government’s offer?

Q2. Would you argue for or against accepting the federal offer? Why?

Q3. If you decided to accept the offer and joined an ACO, how would it change the way care is organized in your community, given the new financial incentives embedded in a capitated rate?