prepare for downside risk in a collaborative aco

More and more, health care systems are forced to take downside risk on their patients through value-based purchasing and mandatory bundled payments. Hospitals and physicians who do not take downside risk will get paid less than those who do, and this gap will only widen over time.

If health care systems want to remain viable, they will have to move into downside risk, take control over delivery system reform, collaborate to receive the benefits of scale, and become population health experts – including prevention, wellness, chronic care management, and HCC coding.


The vast majority of ACOs will have to combine lives in order to reliably take downside risk for their population. Collaborative ACOs allow independent providers to fully participate in value-based payment while retaining their autonomy. This framework for population health focuses on wellness, prevention, and chronic care management while leaving clinical decision-making to the local clinicians. Collaborative ACOs can reduce the variability of shared savings and losses for both participants and payers, allowing providers to take risk without needless gambling. Caravan Health has an innovative governance, shared savings and accountability model that allows multiple, unaffiliated entities to collaborate and out-perform fee-for-service.

Savings and Losses by ACO Size


Graph of risk adjustment with ACO size

The majority of ACOs are too small to succeed, let alone be prepared to take on downside risk. ACOs with less than 20,000 lives routinely show savings and losses of 10 to 20 percent simply due to statistical variation in health care spending and HCC coding. 

Through Caravan Health collaborative ACOs, 250 hospitals, ranging from four to 1,000 beds, are leading delivery system reform in ways that benefit everyone in the care continuum: 

  • Patients get proactive, whole-person care with increased access.
  • Clinicians get paid more, but do less administrative work.
  • Hospitals better support their communities, while easily offsetting the reductions in per patient revenue.
  • Medicare consistently saves one percent per year on billions of dollars, making Caravan Health ACOs among the most successful and sustainable payment arrangements in Medicare. 

Hear from our team of experts on how the Collaborative ACO model is the future of accountable care.

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