To gain an understanding of the federal legislation, it is necessary to first understand its source. Modeled virtually line by line on the 2006 Massachusetts legislation, the experience of Massachusetts with its Reform, notably as reflected in its “new” 2010 Reform legislation portends what is likely to happen with the federal legislation. Alternative Quality Contracts devised by Massachusetts BC/BS - and cited in the ACO Regulations - are seen as a new way of reigning in the growth rate of healthcare spending by incenting providers to assume risk for controlling budgets without many of the perceived flaws of 1990s-style capitation. Key financial aspects of AQC design include risk adjustments for age, sex and health status and limitations on the annual growth rate in budgets. Two key players in the development of financially successful physician networks in Massachusetts examine the successes and possible solutions to the shortcomings of the Model for Reform.