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U.S. health care payment and delivery-system reforms have focused on improving care by making organizations accountable for outcomes, quality, and costs. Payers have supported the implementation of accountable care organizations (ACOs), bundled-payment models, and other value-based payment reforms because they believe that holding health care systems accountable for population-level costs and quality will be more effective than focusing accountability at the physician level. Evidence suggests that these models have increased value but have underperformed relative to the aspirations for them.
Several reasons have been proposed for the limited success of value-based reforms, including lack of clarity among physicians about how financial risks will be shared, inadequate risk adjustment for patients with complex conditions, and heterogeneous outcome measures. One factor that has often been overlooked is the misalignment between organizations’ incentives to spend wisely under value-based payment models and individual physicians’ incentives to reduce their malpractice liability risk. The salience of this risk for physicians means that policies that make organizations accountable for costs and quality are unlikely to be completely successful unless they address the role of liability in physicians’ decision making. For example, for risk-bearing organizations, cutting spending often begins with identifying low-value services and reducing their use. But evaluations of ACOs have revealed limited reductions in low-value care,1 a finding that is particularly surprising given that many low-value services, such as imaging and other diagnostic studies, are ordered by physicians who don’t have a financial stake in the service being performed, including primary care providers.