Join an ACO or take that hospital job? The big decision

Tags: bobbitt, accountable care organization, hospital, payment reform, practice management, practice transformation

Primary care physicians around the country are facing the largest decision of their lives: Do I stay independent and maybe form an accountable care organization with other independent physicians, or do I become an employee of a hospital or health system? As accountable care is taking hold, new data may alter historic thinking on this “bet-the-practice” question.

By Julian D. “Bo” Bobbitt, Jr., J.D.

The historic case for hospital employment

Tired of being overworked, under-satisfied, and overwhelmed with growing regulatory requirements, many primary care physicians have sought the security and strength of hospital employment. They say the pressures to invest in technology, billing, coding, and continued reimbursement pressures are just too great. Yet the majority of these physicians miss their days of self-employed autonomy. On average they are less productive and they worry that the clocks on their compensation guarantees are ticking down. Most of the moves by your colleagues, and perhaps you, to hospital employment have been defensive. It was just no longer feasible to stay afloat in the current fee-for-service system. You cannot work any harder, faster, or cheaper. You can no longer spend satisfactory time with your patients.

On the other hand, some of you may have joined a hospital or health system to be proactive in gaining a solid platform to prepare for the new value-based payment era. You may have envisioned being integrated with a critical mass of like-minded physicians and facilities, aided by advanced population management tools, a strong balance sheet, and all linked together on the hospital’s health information technology platform. You read that primary care should be in a leadership position and financially incentivized in any ACO, including a hospital’s. Independent physicians could theoretically form ACOs, too, but lack the upfront capital, know-how, and any spare intellectual bandwidth to do so. So from a strategic perspective, becoming employed with other physicians by a health system has seemed the way to go.

New data

The pace has quickened for health care’s movement away from fee-for-service or “pay-for-volume” to payment for better outcomes at lower overall costs, or “pay-for-value.” The factors that applied to the decision to become employed in the fee-for-service era may be yielding to those in the accountable care era sooner than anticipated. Independent physician-led ACOs appear to be adapting better than hospitals to this mega change. Although much better prepared fiscally, hospitals are conflicted, or at least hesitant, to make this switch because much of the savings comes from avoidable admissions and readmissions. On the other hand, emerging data and experience are showing that physician-led ACOs can be very successful.

There are some very integrated and successful hospital-led integrated ACOs or other value-delivery hospital/physician models. In fact, this author believes that if the hospital is willing to right-size and truly commit to value, it can be the most successful model. However, many physicians signed volume-only physician work RVU compensation formulas in their hospital employment agreements, with no incentive payments for value. They have not been involved as partners, much less leaders, in any ACO planning. Even though the fee-for-service days are waning and strains are showing for many hospitals that are not adapting, for many employed physicians, the pace of preparedness for the accountable care era has been disappointing.

New data shows that while most of the early ACOs in the Medicare Shared Savings Program were hospital-led, there are now more physician-led ACOs than any other type. At the same time, early results of some modest primary care-only ACOs have been exciting. One rural primary care physician ACO, Rio Grande Valley Health Alliance in McAllen, Texas, is preliminarily looking at 90 percentile quality results and more than $500,000 in savings (unofficial) per physician in their first year under the Medicare Shared Savings Program.

In fact, in a May 14, 2014 article in the Journal of the American Medical Association, its authors stated: “Even though most adult primary care physicians may not realize it, they each can be seen as a chief executive officer in charge of approximately $10 million in annual revenue.” They note that primary care only receives 5 percent of that spending, but can control much of the average of $5,000 in annual spending of their 2,000 or so patients. The independent physician-led Palm Beach ACO is cited as an example, with $22 million in savings their first year. They recommend physician-led ACOs as the best way to leverage that “CEO” power.1 

These new success lessons are being learned and need to be shared. Primary care physicians need to understand that the risk of change is now much less than the risk of maintaining the status quo. You need transparency regarding the realities of all your choices, including hospital employment and physician ACOs. This author heartily endorses the trend recognized in the JAMA article: “[A]n increasing number of primary care physicians see physician-led ACOs as a powerful opportunity to retain their autonomy and make a positive difference for their patient—as well as their practices’ bottom lines.”2


  1. F. Mostashari, MD, MPH; D. Sanghvi, MD; M. McClellan, MD, PhD; Health Reform and Physician-Led Accountable Care: The Paradox of Primary Care Physician Leadership, Journal of American Medical Association, 2014; 311(18): 1855-1856.
  2. Id.


Mr. Bobbitt is a senior partner and head of the Health Law Group at the Smith Anderson law firm in Raleigh, North Carolina. He has many years’ experience assisting physicians form integrated delivery systems. He has spoken and written nationally to primary care physicians on the strategies and practicalities of forming or joining ACOs. This article is meant to be educational and does not constitute legal advice. For additional information, readers may contact the author at or (919) 821-6612.

This article is reprinted with permission of Family Practice News.