New Marketplace
New Risk, New Business Models

ACO Spillover Effects: An Opportunity Not to Be Missed

Article · September 21, 2016

Accountable care organizations (ACOs) provide care for defined populations of patients under risk-based contracts that provide financial incentives to meet specific expenditure targets and quality metrics. Some studies have already shown that ACOs have had a positive impact in terms of improved quality of care and at least modestly reduced health care expenditures. A key concern of practice leaders and policymakers is whether ACOs will seek to provide equal care for all patients, regardless of whether or not they are covered by the ACO contract. Little is known about the impact that ACOs have on the care that is provided to non-ACO patients who are seen by ACO providers — that is, the “spillover effect” of ACOs.

To succeed under the terms of their ACO contracts, ACO providers are changing the way in which they deliver care. For example, they have expanded their use of nurse care coordinators, enhanced their electronic health records (EHR) capabilities, increased their prevention and screening programs, and given greater attention to engaging patients. While ACOs may not be directly compensated for making such changes, they are incentivized to do so by the potential to share in the resulting cost savings. The extent to which these changes are impacting non-ACO patients, however, is largely unknown.

Existing studies have not distinguished between spillover effects that are the result of activities or mechanisms that are applied consistently across all patient groups (such as the use of EHRs) and those that are the result of activities that are performed at the discretion of the provider or health system (such as the use of non-reimbursed care coordinators or specific behavioral health interventions). These services may be provided for ACO patients but not for non-ACO patients who could also benefit from them.

The Causes of Spillover Effects

During the course of our own case study research into ACOs, we were intrigued to find frequent examples of mechanisms that could result in spillover effects. Our case studies were based on interviews with 40 senior leaders, physicians, nurses, and care coordinators across four diverse ACOs. All four organizations held a Medicare ACO contract: one was a Pioneer ACO, whereas the other three were part of the Medicare Shared Savings Program. The organizations varied in size from less than 10,000 beneficiaries to greater than 40,000. All but one had risk-bearing contracts with commercial insurers in addition to Medicare, and all delivered care to patients who were not covered by an ACO contract.

Interestingly, all four case study ACOs had made changes to their systems and processes to respond to the new incentives within their risk-bearing contracts. They had implemented new initiatives or expanded existing initiatives related to transitions of care, care coordination programs, prevention services, and care gap analysis.

Providers Seek to “Level-Up”

Providers and leaders within these four ACOs recognized that although some changes benefited all patients (representing an involuntary spillover effect), there was an inequality in the care received by patients who were covered by the ACO risk-bearing contract and those who were covered by other insurance or payment arrangements. Where such inequalities were identified, we found a desire among providers to “level-up” care across all payer types and to become “payer agnostics” by delivering the same standards of care to all patients, regardless of payer or contract type.

Providers wanted to level-up for two reasons. First, leveling-up was seen as practical. Providers did not want to have to spend time understanding the specifics of each patient’s insurance. As one senior clinical leader noted, “I know for a fact that the physicians do not treat patients that are in the ACO differently. And it’s mostly because they don’t have the capacity to do that.” Second, leveling-up was seen as ethical. Providers felt that if they were delivering best-practice care, then all patients should be receiving this new level of care, regardless of their insurance coverage or payer contract terms. For providers and leaders, this point hit on the fundamental ethical principles of medicine. One leader stated, “We’re not doing anything special for [ACO] patients versus anybody else. The point is, we’re doing the right thing for the customer, and that’s what we’re gonna stay focused on.”

Responses and Realities in the Drive to Level-Up

In response to this desire among providers to level-up, some ACO leaders embraced the idea of providing the same standards of care for all patients while also recognizing that the resulting spillover effects would be beneficial for their non-ACO patients. One case study site was using its Community Benefit Funds to provide uninsured patients with the additional services that had been developed to meet the needs of ACO patients. One respondent said that non-ACO patients “have been able to basically reap the benefits, a spillover effect of those care pieces, but, again, we’ve been able to justify that in our own internal way, essentially stating, ‘You know what? We’re non-profit, it’s the right thing to do for the community.’” Another case study site had requested investment from its parent hospital system on the basis of its strategic decision to move toward population health even if the economic projections in the short term were unfavorable.

Support for this drive to level-up care was not consistent across all study sites. Some ACO systems found this desire to provide the same care to all patients created tensions that they could not diffuse. For example, leaders at one ACO said that they could not afford to level-up standards of care for patients affiliated with payers with whom the ACO had not yet agreed on sufficient reimbursement. In particular, ACOs that were not part of an integrated hospital system appeared to have more limited capacity for discretionary spending and could not act as a buffer between the reality of the payment terms and the professional desires of their providers to level-up and provide the same care to all patients.

Operational constraints were also a barrier even in cases in which financial considerations did not preclude leveling-up. One site had limited capacity within its central data analytics team because of the difficulty of recruiting skilled staff. Another site struggled to expand its care coordination team because of the difficulty of hiring individuals with the right skills and personalities to succeed in the role and finding the time needed from existing staff to orient new team members.

To offset tensions with providers about the different care standards for different groups of patients, one site was using pilot programs to test approaches on the whole ACO population, with a view to rolling them out to all patients later. Clinicians considered this pilot initiative to be acceptable as a temporal improvement exercise rather than as a permanent solution to the inequality in care standards. The system leaders hoped that, by the end of the pilot program, sustainable funding would have been negotiated into contracts with most payers. As one system leader noted, “We want to treat everyone the same when they come in the door. So that’s where this is all heading. But to start with, we said, while we’re learning, while we’re developing it, let’s take the [ACO] population and work with them.” To avoid awkward conversations about prioritization and access to resources, another site was using its automated workflow EHR processes to serve some patient groups differently than others without the explicit awareness, and hence discomfort, of the provider.

How Spillover Effects Can Make Care Better, Faster

How ACOs respond to the drive to level-up by providing the same care experience to all patients may significantly affect the overall impact of ACO programs on the health care industry. Leveling-up may trigger powerful intrinsic motivations and may help to deliver improvements for all patients more quickly. However, these potential effects need to be balanced against broader financial and operational constraints, which may be more easily addressed by large systems that can draw on their financial reserves. In the short term, embracing voluntary mechanisms to level-up may be possible only for larger, system-led ACOs, which may give these organizations an advantage over smaller, provider-only–led ACOs.

To extend the impact of government ACO programs, Medicare and Medicaid policymakers may want to find opportunities to encourage leveling-up and to maximize the spillover effects of ACOs for non-ACO patient groups. The continuing implementation of value-based payment arrangements contained in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) will provide major incentives for leveling-up. Commercial insurers will also want to evaluate these effects when deciding either to “free ride” on the Medicare-induced ACO spillover effects or to directly incorporate payment for Medicare ACO–equivalent services into the commercial ACO contract.

Embracing the desire of ACO providers to level-up care to the new standards created for ACO patients may result in immediate spillover effects that improve the quality and affordability of health care for all patients.


This research was funded by the Commonwealth Fund as part of the Harkness Fellowship program. The funder had no role in the design or conduct of this study. The Commonwealth Fund is a private independent foundation based in New York City. The views presented here are those of the author and not necessarily those of the Commonwealth Fund, its directors, officers, or staff.

The authors thank Mark Smith, MD, MBA, for his helpful comments on an earlier draft of the manuscript.

Call for submissions:

Now inviting expert articles, longform articles, and case studies for peer review


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »

More From New Marketplace

What Is Risk Management in Healthcare?

Healthcare risk management comprises the systems and processes employed to uncover, mitigate, and prevent risks in healthcare institutions. Understand its purpose, elements, the risk manager’s role, and more.

ED Telehealth Express Care Service Patient Room

Revolutionizing the Delivery of Care for ED Patients

How the NYP OnDemand Emergency Department Telehealth Express Care Service reduced stay times and revisit rates in one year.

Targeting Unconscionable Prescription-Drug Prices — Maryland’s Anti–Price-Gouging Law

Why, in the early 21st century, are so many drugs that were cheaply available in the 20th century becoming prohibitively expensive?

The Economics of Indication-Based Drug Pricing

What would indication-based drug pricing accomplish?

Controlling the Cost of Medicaid

Both political parties should support policies that focus on incentives as a mechanism for improving and sustaining their value.

Resetting the Nation’s Health Care Quality Agenda

Poor measures of care quality have consequences. The National Quality Forum is essential to creating measures that are valid and reliable.

Untapped Business Opportunities for Entrepreneurs in Delivery System Reform

Opportunities for Private-Sector Entrepreneurship in Health Care Transformation

Two veterans of public service say that government can do only so much — which creates attractive business opportunities for entrepreneurs.

Moving Past the EHR Interoperability Blame Game

Why can't EHRs talk to one another? We never created the right incentives, but we pretend that we did.

Emerging from EHR Purgatory — Moving from Process to Outcomes

What's the effect of the mode of physician payment when it comes to EHRs?

Reframing Analytics: Transforming Insights into Action

Centralizing clinical data for an integrated delivery system revealed a surprising lesson: sometimes predictive analytics are not enough.


A weekly email newsletter featuring the latest actionable ideas and practical innovations from NEJM Catalyst.

Learn More »


From the Commonwealth to Obamacare: Reflections…

The former Executive Director of the Commonwealth Health Insurance Connector — a model for the…

Value Based Care

220 Articles

Harnessing Emerging Information Technology for Bundled…

A four-part framework developed by physicians at Partners HealthCare provides a stepwise process for assessing…

From the Commonwealth to Obamacare: Reflections…

The former Executive Director of the Commonwealth Health Insurance Connector — a model for the…

Insights Council

Have a voice. Join other health care leaders effecting change, shaping tomorrow.

Apply Now