Structuring Incentives Within Organizations: The Case of Accountable Care Organizations / Brigham Frandsen, James B. Rebitzer.

Format:

Book

Author/Creator:

Frandsen, Brigham.

Contributor:

National Bureau of Economic Research.

Rebitzer, James B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20034.

NBER working paper series no. w20034

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Structuring Incentives Within Organizations

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

Accountable Care Organizations (ACOs) are new organizations created by the Affordable Care Act to encourage more efficient, integrated care delivery. To promote efficiency, ACOs sign contracts under which they keep a fraction of the savings from keeping costs below target provided they also maintain quality levels. To promote integration and facilitate measurement, ACOs are required to have at least 5,000 enrollees and so must coordinate across many providers. We calibrate a model of optimal ACO incentives using proprietary performance measures from a large insurer. Our key finding is that free-riding is a severe problem and causes optimal incentive payments to exceed cost savings unless ACOs simultaneously achieve extremely large efficiency gains. This implies that successful ACOs will likely rely on motivational strategies that amplify the effects of under-powered incentives. These motivational strategies raise important questions about the limits of ACOs as a policy for promoting more efficient, integrated care.

Notes:

Print version record

April 2014.