Physician incentives introduced by the new Accountable Care Organizations could reduce costs of care by 5 percent

The U.S. spends more on healthcare as a percentage of GDP and on a per capita basis, than any other country in the world, something that aspects of 2010’s Affordable Care Act aim to alleviate. Kate Ho and Ariel Pakes take a close look at the likely effects of Accountable Care Organizations: groups of providers whose payment arrangements give physicians incentives to control costs. They find that through capitation (flat, fixed payments) and the sharing of savings, these new organizations could reduce healthcare costs by between 4.5 and 5 percent without corresponding quality reductions.