"When Medicare and some private payers begin to contract with ACOs, they will initially reward these organizations on the basis of shared savings; however, the leaders of the ACO movement are predicting there will be other reimbursement methods, including prepayment models such as partial and full capitation," the AMGA report notes.
The report goes on to say that "unlike volume-based reimbursement, which encourages the provision of more care, prepayment forces providers to switch their emphasis from merely treating sickness to also maintaining or improving health to prevent costly avoidable illness and unnecessary care.
Payment bundling and shared savings—two other payment models for ACOs—also require the improvement of population health. So, it is clear that if physician groups aim to succeed as ACOs or ACO members, they will have to move to a population health management approach that is aligned with the new reimbursement models."
And it's not just the providers who need to "aim to succeed" through an ACO. Payers are banking on these approaches to patient care to help drive costs down for them as well. QualChoice, a health plan based in Little Rock, AR, fell into PHM about eight years ago when looking into pay-for-performance programs, says Richard Armstrong, MD, vice president of medical affairs for the health plan, which was started in 1994 as a third-party administrator by the University of Arkansas for Medical Sciences.