A Coordinated Care Organization (CCO) is a state-level innovation in healthcare delivery designed to improve the quality of care while controlling costs. This model shifts focus from the traditional fee-for-service system, which rewards the volume of services, toward a system that rewards health outcomes. CCOs provide comprehensive, integrated health services for a specific population, typically those covered under a state’s Medicaid program, by creating a single, accountable entity. This approach transitions away from fragmented care, promoting a unified approach to a patient’s overall well-being.
Defining the Coordinated Care Organization Model
A Coordinated Care Organization is a network of healthcare providers—including doctors, hospitals, clinics, and specialists—who formally agree to manage the complete care of a defined group of patients. These organizations are state-developed and operate within a specific local or regional geography to serve the Medicaid-eligible population. The CCO structure replaces systems where physical, behavioral, and dental care were handled by separate, disconnected entities, often creating a fractured patient experience.
The CCO model holds a single organization responsible for a patient’s entire health journey, encouraging providers to communicate and align treatment plans. A unique aspect of the CCO structure is its community governance, guided by a partnership of local providers, community members, and health system stakeholders. This local involvement ensures that decision-making and resource allocation are responsive to the specific health needs and priorities of the community being served.
Integrated Care Delivery
The mechanism through which CCOs achieve their goals is the mandatory integration of various health services. CCOs are explicitly required to develop a continuum of care that incorporates physical, behavioral (mental health and addiction recovery), and oral health services under one coordinated umbrella. This ensures that a patient receiving treatment for a chronic physical condition, such as diabetes, also has their mental health and oral hygiene needs addressed as part of a single, holistic treatment plan.
A primary differentiator of the CCO model is its formal focus on the Social Determinants of Health (SDOH), the non-medical factors impacting a person’s health. The organization addresses issues like housing instability, food insecurity, and transportation barriers, recognizing these factors influence health outcomes more than medical care alone. CCOs can allocate budget portions to offer “health-related services” (HRS) not typically covered by standard insurance, such as nutrition education or assistance with housing. These flexible services improve community health upstream, reducing the need for expensive downstream medical interventions like emergency room visits and hospital readmissions.
Accountability and Quality Metrics
CCOs are held accountable to the state and the public through a rigorous system of performance measurement and transparency. This accountability is enforced using standardized quality metrics, often called Performance Measures, that track specific health outcomes and service rates across the population. Performance against these metrics directly influences the CCO’s financial success and its continued operation.
These quality measures cover a broad spectrum of care, including rates of preventive services, management of chronic diseases, and efforts to reduce unnecessary utilization of high-cost services. Tracked metrics include childhood immunization rates, preventive dental care, and timely screening and follow-up for depression or substance use disorders. Furthermore, some metrics focus on health equity, assessing the CCO’s success in providing culturally responsive care and meaningful language access to all members.
The Value-Based Payment Structure
The financial engine of the Coordinated Care Organization is a value-based payment structure that contrasts with the traditional fee-for-service (FFS) model. Instead of paying providers for each visit or procedure, CCOs operate on a global budget, receiving a fixed, per-member, per-month payment—known as capitation—to cover all necessary healthcare services. This capitated payment incentivizes the organization to keep members healthy and utilize preventative care, as the CCO must cover all costs within that fixed budget.
This financial arrangement places a direct financial risk on the CCO, making it responsible for the total cost of care for its members. If the CCO provides efficient care that keeps costs below the capitated budget, it may retain a portion of the savings, a concept called shared savings. Conversely, the CCO assumes shared risk, absorbing costs if expenses exceed the budgeted amount, which motivates the organization to avoid costly, preventable illnesses. The CCO’s ability to earn shared savings is tied to its performance on quality metrics, ensuring financial reward links to improved patient outcomes, not just cost reduction.