Accountable Care Organizations are too small and loosely affiliated for financial bonuses to be effective at improving performance.

One part of the Affordable Care Act – or Obamacare – has an attempt to tackle the fragmentation of US health care delivery through the introduction of Accountable Care Organizations (ACOs). These organizations contract to provide care to large groups of Medicare recipients and there are group incentives for care to be provided more cost effectively. In new research Brigham Frandsen and James B. Rebitzer find that ACO’s relatively large sizes and loose setups mean that more powerful incentives are needed to reach cost-reduction targets. They write that for an ACO to achieve a cost reduction of 6 percent, bonuses would need to exceed 12 percent of costs – twice the intended savings.