Federal Leaders Promote ACOs as Part of Health Reform

"Both the private sector and Medicare have to realize there has to be fiscal pressure—restraint on expenditures, payment rates, and utilization—as a move toward redesigning the delivery system," Miller said, adding that ACOs are a "very ripe area for Medicare and the private sector to come together."

Both McClellan and Miller were critical of the existing fee-for-service model. "We think there are some real issues with the traditional fee-for-service programs in terms of the incentive structure—there's very little incentive. You get paid the same whether you have good quality or bad. There's not a lot of focus of coordinating care," Miller said.

"The real problem with fee-for-service isn't the price level, it's the whole pricing structure," McClellan said. "The 21st century is the century of personalized medicine. That's sort of what is exactly the opposite of what the fee-for-service is going to support," he added.