What is an accountable care organization (ACO)?

As our healthcare landscape evolves, the need for a more patient-centered approach becomes increasingly clear. An accountable care organization (ACO) is a model that aims to improve the quality of care and care coordination to enhance patient outcomes. For those enrolled in Medicare, it's important to understand the basics of ACOs and how they can impact your patient experience.

In this article, we'll explain what an ACO entails and why it matters for individuals with Medicare coverage.

Takeaways from this blog post:

• ACOs involve healthcare providers working together to provide coordinated care to patients, aiming to improve health outcomes and reduce healthcare costs.
• ACOs offer benefits such as avoiding repeated tests and appointments, better communication between healthcare providers, and lower out-of-pocket costs for Medicare beneficiaries.
• Different types of ACO programs are available, catering to various patient populations and providing incentive payments to providers that deliver high-quality, cost-effective care.

What are ACOs?

In an ACO¹, healthcare providers from different specialties and settings work together to provide coordinated care to patients. The goal of an ACO is to improve the health outcomes of patients while reducing healthcare costs by avoiding unnecessary duplication of services. They focus on preventive care and effective management of chronic conditions.

ACOs may consist of² the following:

• Primary care physicians (PCPs)
• Nurse practitioners
• Physician assistants
• Specialists
• Pharmacies
• Hospitals and hospital systems
• Skilled nursing facilities and home health agencies
• Additional care team members who offer and coordinate medical-related services

The Affordable Care Act (ACA) included the creation of the Medicare Shared Savings Program, which partners³ with ACOs, as a government attempt to slow rising healthcare costs.

How do ACOs work?

As a Medicare beneficiary, your primary care doctor may assign you to an ACO if they participate in one. If your doctor is in an ACO, you can maintain all your Medicare benefits and have the option to see any doctor or healthcare professional who accepts Medicare. The network of doctors in the ACO will work together to coordinate your care, communicate with each other about your health needs, and share information to ensure that you receive the most appropriate and effective care.

ACOs vs. HMOs

ACOs and health maintenance organizations (HMOs) have similarities in managing risk and controlling costs. But an ACO is different from an HMO because it's not an insurance plan—it’s an organization that organizes care for patients with an existing Medicare plan. HMOs offer healthcare services to a specific group of patients for a set cost, while an ACO can't alter a patient's Medicare benefits. Additionally, patients in HMOs must choose from a list of approved healthcare professionals. In ACOs, patients have the freedom to see any physician.

What are the benefits of ACOs?

An ACO offers several benefits to patients, physicians, and healthcare systems alike.

Here are a few of the benefits ACOs provide to patients:

• You receive coordinated patient care that's focused on your specific needs.
• You avoid the frustration that comes with repeated tests and appointments. This saves you valuable time and money.
• Through electronic health records, your primary care doctor and other healthcare providers can all see the same test results, treatments, and prescriptions you're taking.
• Better-coordinated care helps prevent medical errors and negative drug interactions.
• Better communication can help protect against Medicare fraud.
• Being part of an ACO may result in lower out-of-pocket costs for you as a Medicare beneficiary.

On top of improving care management, ACOs also hold primary care providers accountable for the quality and cost of care they deliver to Medicare patients. This means that providers in an ACO have financial incentives to deliver high-quality care in a cost-effective manner since they may receive bonuses if they meet certain quality and cost targets.

What are the different types of ACOs?

There are hundreds of ACOs that Medicare patients can be aligned with. Each of them serve a different need of the patient population.

Here are some of the ACO programs Medicare offers⁴:

• Medicare Shared Savings Program: This ACO program supports fee-for-service beneficiaries. It's one of the largest value-based care programs with 480 participating ACOs 10.8 million beneficiaries⁵.
• ACO Investment Model: This is for Medicare Shared Savings Program ACOs to test pre-paid savings in rural and underserved areas.
• Advance Payment ACO Model: This is for certain eligible providers already in or interested in the Medicare Shared Savings Program.
• Comprehensive ESRD Care Initiative: This ACO program is for Medicare beneficiaries who receive dialysis services.
• Next Generation ACO Model: This is for ACOs experienced in population health management.
• Pioneer ACO Model: This ACO is for healthcare organizations and providers who are already skilled in coordinating patient care across different settings.

Conclusion

ACOs promote collaboration among healthcare providers, improve the quality of care for patients, and reduce unnecessary healthcare costs. Understanding what an ACO is and how it can benefit you as an individual with Medicare is important in ensuring that you receive high-quality, coordinated care that meets your healthcare needs.

If you have any questions or concerns about ACOs and how they may impact your healthcare, you should speak with your healthcare provider or Medicare representative for more information.

This article was originally published on December 30, 2010. It was last updated on July 31, 2024.

1. https://www.medicare.gov/providers-services/coordinating-care#aco
2. https://www.cms.gov/priorities/innovation/key-concepts/accountable-care-and-accountable-care-organizations
3. https://www.cms.gov/newsroom/press-releases/participation-continues-grow-cms-accountable-care-organization-initiatives-2024
4. https://www.cms.gov/priorities/innovation/innovation-models/aco
5. https://www.aha.org/accountable-care-organizations-acos/accountable-care-organizations