Part 7: How Healthcare Gets Paid Changes How It’s Organized
ACOs, Medicare Advantage, Medicaid MCOs, Risk-Bearing Providers, and Bundled Payments
Every organizational model we’ve covered so far describes how care is delivered. This section is about how care is paid for — and the structures that sit on top of delivery to manage financial risk.
The shift from fee-for-service (do more, earn more) to value-based care (keep people healthy, earn more) is the defining transformation in American healthcare. But “value-based care” isn’t one thing. It’s a spectrum of payment models, each creating different incentive structures.
ACOs (MSSP) — About 480 groups of providers that share savings (or losses) with Medicare based on whether they keep costs below a benchmark while meeting quality targets. The gentlest form of risk. Think of it as fee-for-service with a year-end bonus or penalty.
ACO REACH — The aggressive version. Capitation-like payments within traditional Medicare. Allows non-provider entities (insurance companies, PE-backed firms) to participate. Politically contentious — critics call it backdoor privatization of Medicare.
Medicare Advantage — Private insurance plans that receive a fixed monthly payment from Medicare to cover everything for enrolled beneficiaries. Over 50% of Medicare beneficiaries are now in MA. When a health system owns its own MA plan (Kaiser, UPMC, Geisinger), it controls both the premium dollar and the care delivery.
Medicaid Managed Care Organizations (MCOs) — The Medicaid equivalent of MA. Over 70% of Medicaid beneficiaries are in managed care. Centene and Molina are the largest. Unlike MA (which CMS runs nationally), every state designs its own Medicaid program, creating 50+ different rule sets.
Risk-Bearing Provider Organizations — Any provider group that accepts a fixed payment from a payer and manages total cost of care for a population. If they spend less than the payment, they keep the surplus. If they spend more, they eat the loss. This is the endpoint of value-based care.
Bundled Payment Participants (BPCI-A) — A single payment covers an entire episode of care — say, a hip replacement plus 90 days of recovery. The hospital is accountable for everything that happens during those 90 days, including whether the patient ends up at a cheap rehab vs. an expensive nursing home.
The Layering Effect
These payment models don’t replace the organizational structures from earlier sections — they layer on top. A CIN might participate in an ACO. An IDN might own an MA plan. An IPA might function as a risk-bearing entity. A community hospital might participate in bundled payments.
This layering is why healthcare organizational charts look like spaghetti. It’s not poor design — it’s the natural consequence of overlapping payment and delivery structures.