Accountable Care Organization (ACO)
Definition: Accountable Care Organizations (ACOs) are groups of health care providers and hospitals who partner together to provide high-quality, coordinated care and decrease overall costs for a defined population, with the goal of sharing these cost savings.1 The first Medicare ACOs were approved as part of the Affordable Care Act in 2009. In April 2015, Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which shifted payment from a primarily fee-for-service (FFS) model toward a value-based payment model.2 Alternative payment models, including ACOs, were included among MACRA’s model tracks.
How it relates to ACOs/PCMHs: Payers define the contract length, minimum number of beneficiaries required, and quality metrics that must be met to share cost savings. Patients are typically attributed (or assigned) to the ACO based on claims data. The ACO is then responsible for the care of all attributed patients, including those who are not actively seeking acute care. Cost savings can be shared based on one-sided, shared savings arrangements (in which the organization has no penalty if benchmarks are not met) or two-sided shared savings arrangements (in which providers share both savings and losses). Two-sided risk models typically make the organization eligible for higher sharing rates.
Involved organizations/oversight: ACO programs are available through the Centers for Medicare & Medicaid Services (CMS) and private payers. The Medicare Shared Savings Program allows an approved ACO to be accountable for health care services to Medicare FFS beneficiaries traditionally covered by Medicare Part A (hospitalizations) and Part B (outpatient) services. It is important to note that Medicare Part D services (prescription drugs) are not included in Medicare ACO coverage. The Center for Medicare and Medicaid Innovation is continuing to test various innovative ACO models.
Resources:
- Centers for Medicare & Medicaid Services. Accountable Care Organizations (ACOs): General Information. Baltimore, MD: CMS. Available at: https://www.cms.gov/priorities/innovation/innovation-models/aco. Accessed June 26, 2024.
- American Academy of Family Physicians. Accountable Care Organizations. Leawood, KS: AAFP. Available at: aafp.org/family-physician/practice-and-career/delivery-payment-models/acos.html. Accessed June 26, 2024.
Last reviewed and updated 3/11/24 by Marilee Clemons, PharmD, BCACP