What Are Accountable Care Organizations

When a person is covered by Medicare, getting proper care can be tricky. It is difficult to coordinate efforts across organizations, and paying for all the care needed can be difficult. Accountable Care Organizations, or ACOs, seek to correct these issues.

What Is an Accountable Care Organization?


Rather than handle each patient individually, in an ACO, doctors and healthcare providers like hospitals and clinics come together to provide coordinated care to Medicare patients. Participation is voluntary. The idea is to prevent medical errors and avoid duplicating treatment efforts by coordinating a patient's care. This strategy often leads to a reduction in costs across the board, benefitting the patient, the ACO, and Medicare.

Congress created Accountable Care Organizations to help reduce Medicare costs and in turn help reduce government spending on the program. When ACOs were introduced in 2011, the U.S. Department of Health and Human services estimated that they could save Medicare as much as $960 million in the first three years alone.

Not All ACOs Are Created Equal

An Accountable Care Organization is a type of medical structure, not an entity in and of itself. Medicare offers three ACO programs:

  • Pioneer ACO Model — When Medicare first launched ACOs, it did so in the Pioneer ACO Model. This pilot program includes 19 participants, each with experience in coordinating care in different settings and from different providers. Like other ACOs, the pioneer ACOs voluntarily work with different providers to coordinate care and negotiate cost savings. This program is more aggressive than other ACO programs. It also carries greater risk for participants, as well as higher cost savings. As participants demonstrate a certain level of savings, they can transition to a more population-based model.
  • Medicare Shared Savings Program — Eligible providers can participate in the Medicare Shared Savings Program by forming or becoming part of an Accountable Care Organization. This program is designed to help Medicare Fee For Service (FFS) participants form ACOs and cut unnecessary costs while passing benefits like improved quality of care on to Medicare beneficiaries. According to the Centers for Medicare & Medicaid Services, there are 404 ACOs currently in this program, covering 7.3 million Medicare beneficiaries. Roughly 70 percent of participants are in metropolitan areas.
  • Advance Payment ACO Model — For would-be ACO participants in rural areas, there is the Advance Payment ACO Model. In this system, participants receive upfront payments which can be used to build and fortify their coordination efforts. Payment is based on the number of beneficiaries assigned in the past. Some Advance Payment ACO Model participants receive fixed payments, while others receive variable payments. There are 35 ACOs participating in this program.

When Did ACOs Start?

The first ACOs started in late 2011, prior to the official launch of the program in January 2012. Some medical providers opted to form Accountable Care Organizations to serve Medicare patients as well as those with private insurance.

How Is It Different?

For patients, the change is minimal. Medicare beneficiaries who go to primary care doctors in an ACO are still free to see other doctors outside that network at no additional cost.

Accountable Care Organizations are designed to help reduce the cost of providing Medicare. Participants take advantage of cost savings, while patients enjoy coordinated, efficient, and accurate care.

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