Incentives can be hard to get right

Medicare has been trying to move away from the traditional fee-for-service model that encourages over-treatment. The push has been to get providers interested in a new payment model where they take on additional risk, but are rewarded when their patients incur less medical spending. In part to ease the transition, Medicare pegs reimbursement rates to the participating institutions' prior performance metrics. Hence, organizations that were inefficient wouldn't be held to an industry-wide benchmark. Likewise, organizations that are already efficient would have an incentive to do better. Unfortunately, it can be difficult to get these policies correct, as evidenced by Dartmouth's departure from the program and return to the traditional fee-for-service model.

It appears that even though Dartmouth did better, they did not do better by enough to profit financially (there is a threshold that must be crossed before the savings are shared), in part because they were efficient to begin with. It's easier for the less efficient provider organizations to benefit from adopting the new payment model.