An Accountable Care Organization (ACO) is a voluntary group of healthcare providers, including doctors, hospitals, and other clinicians, who work together to deliver high-quality, coordinated care to their assigned patient population, often Medicare beneficiaries. The primary goal is to ensure patients receive the right care at the right time, avoiding unnecessary duplication of services and medical errors. This structure moves away from the traditional fee-for-service model, which rewards the volume of services, toward a value-based care system that rewards quality and efficiency.
The Organizational Structure and Core Mission
The structure of an ACO brings together all elements of a patient’s medical experience under a single umbrella of accountability. These organizations typically include primary care physicians, specialists, hospitals, and post-acute care facilities like skilled nursing and home health agencies. This comprehensive network is responsible for the full spectrum of care for a defined group of patients over a performance year.
The core mission is to assume accountability for the overall quality and cost of care for that population. By coordinating services across different settings, the ACO aims to prevent fragmentation that often leads to repeated tests, conflicting treatments, and poor outcomes. This requires establishing internal systems for shared care plans and consistent communication among all participating providers. The unified structure ensures the entire care team works toward improving patient health while managing total spending.
Value-Based Payment: The Shared Savings Model
The financial basis of the ACO model is the value-based payment system, most prominently seen in the Medicare Shared Savings Program (MSSP). The payer, such as Medicare, establishes a benchmark cost target for the ACO’s assigned patient population based on historical spending and risk profile. If the ACO successfully manages care and keeps the total cost below this predetermined benchmark while meeting quality standards, the organization is eligible to share in the generated savings.
The degree of financial accountability an ACO accepts determines its potential reward and risk, categorized into one-sided or two-sided risk models. Under a one-sided risk arrangement, the ACO is only eligible to share in the savings, meaning there is no financial penalty if costs exceed the benchmark. This option is used by newer ACOs transitioning into value-based care.
A two-sided risk model allows the ACO to earn a larger percentage of the savings but also requires them to share in the losses if spending exceeds the benchmark. This downside risk arrangement creates a stronger incentive for care transformation and cost management. The Centers for Medicare & Medicaid Services (CMS) encourages movement toward two-sided risk arrangements, as data suggests these models generate greater savings per beneficiary than one-sided models.
Measuring Performance and Quality of Care
An ACO’s financial success in the shared savings model is directly tied to its performance on standardized quality measures. These metrics ensure that cost reduction is achieved through improved care efficiency rather than by withholding necessary services. The quality measures are organized into several broad categories: patient experience, care coordination, preventive health, and management of at-risk populations.
Measures assess factors such as timely access to care, quality of communication with doctors, and patients’ overall rating of their physician. The care coordination and patient safety category evaluates metrics like hospital readmission rates and medication reconciliation after a hospital stay. Preventive health measures track compliance with recommended screenings (e.g., mammography and colorectal cancer screening) and flu vaccination rates. Successfully meeting these quality benchmarks is a prerequisite for an ACO to be eligible for shared savings payments.
What ACO Participation Means for Patients
For patients, participation in an ACO environment translates into a more cohesive and less fragmented healthcare experience. The focus on coordination means providers communicate more effectively, making it less likely for a patient to undergo duplicate tests or repeatedly provide their medical history to different specialists. This improved communication is particularly beneficial for individuals managing complex or chronic conditions.
ACOs emphasize preventive care and chronic disease management to keep patients healthy and out of the hospital. Patients may gain access to enhanced services, such as dedicated care coordinators who help manage appointments, medication schedules, and transitions between care settings. The ACO structure supports the primary care physician as the central hub for all medical services, ensuring the patient receives the right level of care at the appropriate time.