Many current policies and approaches to performance measurement and payment reform focus on individual providers; they risk reinforcing the fragmented care and lack of coordination experienced by patients with serious illness. In this paper we show that Medicare beneficiaries receive most of their care from relatively coherent local delivery systems comprising physicians and the hospitals where they work or admit their patients. Efforts to create accountable care organizations at this level--the extended hospital medical staff--deserve consideration as a potential means of improving the quality and lowering the cost of care.