Elliott Fisher, MD, MPH, a health policy researcher and alumnus of the Robert Wood Johnson Foundation Clinical Scholars program (1983-1985), was recently named director of the Dartmouth Institute for Health Policy & Clinical Practice. Fisher coined the term “Accountable Care Organization” (ACO). In this Clinical Scholar Health Policy podcast, he discusses the origins of ACOs and the effort to develop them in the nation’s health care system. Watch his interview with RWJF Clinical Scholar Chileshe Nkonde-Price, MD, (2012-2014). The video is republished with permission from the Leonard Davis Institute.

Brendan Saloner, PhD, is a Robert Wood Johnson Foundation (RWJF) Health & Society Scholar in residence at the University of Pennsylvania and a senior fellow at the Leonard Davis Institute of Health Economics. This is the first in a series of essays, reprinted from the Leonard Davis Institute of Health Economics’ eMagazine, in which scholars who attended the recent AcademyHealth National Health Policy Conference reflect on the experience.

Like Goldilocks wandering through the house of the Three Bears, policy-makers in search of a health care payment model have found it difficult to settle on an option that is "just right."

Fee-for-service—paying doctors separately for each service they provide—leads to too much unnecessary and duplicative care (too hot!). Capitation—paying doctors a fixed fee for caring for patients—leads doctors to skimp on care and avoid costly populations (too cold!). A "just right" payment model should give providers incentives to provide all the clinically necessary care to patients while keeping costs low.

Shared savings models—allowing providers to keep a portion of the money they save caring for patients—have been touted as one method for aligning the incentives of providers and payers. Most prominently, shared savings is a central element of the Affordable Care Act's Accountable Care Organizations (ACOs).

An ACO is a network of providers that have agreed to accept a bundled payment for treating patient populations, and in return stand to gain incentive payments for meeting performance targets (or to lose money for missing targets). In the "happily ever after" version of ACOs, groups of providers will finally have a business case for coordinating patient medical records, reducing costly visits to the emergency room, and improving patient compliance with chronic disease therapies without leading to excessive procedures or gaps in care. Healthy patients, healthy profits.

But will it work?