The Congressional Budget Office (CBO) stated in June, 2010 -”Slowing the growth rate of outlays for Medicare and Medicaid is the central long term challenge for federal fiscal policy.” Two recently deployed federal initiatives are being used to align hospitals’ and physicians’ incentives and thereby control costs. Both programs are synergistic with the providers’ and purchasers’ desires to improve both the quality and cost efficiencies for all patients. Both the Accountable Care Organizations (ACO) and Acute Care Episodes (ACE) use global (shared) fees to align hospitals’ and physicians’ financial incentives and facilitate quality improvements. Innovative providers are taking advantage of these opportunities to gain market share and increased profits. A third program targets commercial patients and creates federally subsidized, not-for-profit insurance companies that can be formed and managed by integrated hospitals and physicians. These Consumer Operated and Oriented Plans (CO-OP) are the means by which providers can market directly to employers and self-pay individuals and share profits generated by improved efficiencies. The strength of the CO-OP concept for providers is that contracting is done without a traditional insurer or HMO.

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