• One-sided versus two-sided ACOs – Now with charts!

    Austin said the differences needed to be explained more clearly, so I made some charts. I’ve created a hypothetical ACO with 10,000 members. This ACO qualifies for the maximum quality performance sharing rate, but no extra percentage for FQHC or RHC members. HHS has determined that the spending benchmark for this ACO is $10,000 per member, for a total of $100 million per year.

    The first chart shows what would happen if this ACO took the one-sided option. It gives examples for four years, ranging from a 5% increase in spending above the benchmark (bad) to a 20% decrease below the benchmark (awesome). Click through to see full size.


    The second chart shows what happen if this ACO took the two-sided option and had the same outcomes in terms of spending. As you can see, the rewards are higher for good outcomes, but there’s a penalty if spending increases.

    • Thanks! These charts were very helpful.

      Do you think many ACOs will take the two-sided option initially? My assumption is only those groups that now serve as a quasi/proto- ACOs will have the institutional capacity and tolerance for risk (or may have no risk) to go the two sided route.

      I wonder, too, whether the time frame for becoming a two sided ACO will be tweaked during the rule-making process. Two years seems to be a rather short time horizon for getting everything aligned in a way that minimizes financial risk. And, if providers are afraid of that year 3 transition they may just opt not to ever become an ACO in the first place.