How to Profit from the Transformation of Medicare

One of the most game-changing new strategies in health care promoted by the Affordable Care Act, better known as Obamacare, is the introduction of value-based health care. This marks a critical shift from the current fee-for-service system, in which providers are paid for each test and procedure, toward a system that rewards providers based on patient health outcomes.

The law's architects hope that this shift will both improve the quality of care and reduce ballooning Medicare costs. With the Office of the Inspector General for the Department of Health and Human Services reporting that medical errors and general "bad care" contributed to over 180,000 Medicare deaths in 2010, pressure has been building to produce a fix.

Accountable Care Organizations, or ACOs, are the centerpiece of Obamacare's strategy for bending the Medicare cost curve and hopefully improving patient health outcomes. The Centers for Medicare & Medicaid Services, or CMS, recently released data from the first year of the ACO program. Given Medicare's size and pricing power, the results of the Medicare experiment with ACOs may fundamentally transform the U.S. health care system.. On this Friday's episode of Market Checkup, Motley Fool health care analysts David Williamson and Michael Douglass discuss the results and how investors can best profit from this health care megatrend.