Accountable care organization (ACO) contracts between payers and providers usually don't allow cherry picking. They have to take all comers. There are typically higher capitation rates for older, sicker patients. It does take some actuarial sophistication to price those risks correctly but with large numbers of patients things tend to average out.

Who and how is that going to be monitored and enforced? What's the punishment? Cost-of-doing-business fines that the market only ends up paying anyway?

I'm not disagreeing w/ the theory of your proposal. I haven't - yet? - seen how it can actually work.

For Medicare ACOs you can read about monitoring and enforcement here.

https://www.cms.gov/priorities/innovation/innovation-models/...

For ACO agreements between provider organizations and commercial payers, the parties can negotiate any contract terms they like. The agreements are usually confidential but payers aren't naive about this stuff and are fully aware of how to protect their financial interests against cherry picking by providers.