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. Currently, you are paid a fixed amount by medicare- the federal insurance program for the elderly- 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 offered to form an ACO (Accountable Care Organizations) in your community that could accept a capitated annual payment for each person eligible for Medicare.