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Developing an ACO Surplus Distribution Model


An ACO associated with a major New England teaching hospital


To design and obtain physician agreement on a model for distributing Medicare ACO shared savings between the hospital and physicians, and among physician partners.


Veralon worked with ACO senior management to understand the investments that had already been made in the ACO, as well as the ACO’s ongoing operating costs.

We then developed several potential models for distributing ACO shared savings between the hospital and the physicians as a group. The models varied in how they addressed investments in the ACO and physician effort to generate shared savings. Some models provided for repayment of these investments and covered operating costs while others placed greater value on physician effort to achieve shared savings.


Veralon facilitated a session in which a committee of physicians and administrators agreed on basic parameters and goals for the distribution model. With agreement on a foundation, the group then reviewed the proposed models and selected one, with some modifications.

Next, with the committee’s physicians, Veralon developed a methodology for distributing the total physician portion of the ACO surplus to individual physicians. The group decided how to handle different specialties and their varying impact on ACO shared savings and how to account for different sizes of Medicare patient panels.

Veralon drafted performance reports for each physician specialty, using the 33 ACO quality measures and other priority goals for this ACO and PHO. Physician scores on these report cards and the methodology developed will determine the amount of ACO surplus earned by each individual physician.
This shared savings distribution model was approved by PHO and hospital leadership and the ACO’s participating physicians and will be in effect for the ACO’s first year.