The Medicare Payment Advisory Commission last week released its June report to Congress, which examines certain proposed Medicare program reforms. Among other options, the report explores the creation of accountable care organizations (ACO) – a set of health care providers including primary care physicians, specialists and at least one hospital that would receive incentive payments for constraining costs while improving care quality.

MedPAC cited a variety of potential difficulties with ACOs. To minimize distortions from random variations in the patient population, the organizations should be big. But the bigger the organization, the more diluted the impact of any individual doctor's care decisions will be, thereby reducing the effectiveness of financial incentives tied to performance of the overall group.

The report also finds that physician self-referral associated with increased use of imaging services contributes to more spending, contrary to claims that it saves money by preventing expensive interventions. For more, go to www.medpac.gov and click on "Report to the Congress: Improving Incentives in the Medicare Program (June 2009)" under "Documents."