101 Primer For Accountable Care Organizations

Through our 101 Primer series, RTI Health Advance periodically explores key components of the healthcare system, as well as promising healthcare transformation and reform initiatives.

What is an accountable care organization? 

Accountable care organizations (ACOs) are healthcare organizations designed to move care delivery-and-payment away from the traditional, volume-driven, fee-for-service model toward an integrated approach that incentivizes prevention, wellness, quality, and cost containment. ACOs consist of doctors, hospitals, and other healthcare providers who come together to deliver coordinated, high-quality care to patient populations. 

What are the goals of accountable care organizations?

Primary objectives of accountable care organizations include ensuring patients get the right care at the right time, preventing medical errors, and avoiding duplication of services. Put another way, ACOs are designed to help achieve the Institute of Healthcare Improvement’s Quadruple Aim: Improve the patient experience (quality and satisfaction), improve the health of populations, reduce the per-capita cost of care, and improve the work life experience of healthcare providers.

When did accountable care organizations emerge? 

The ACO concept was introduced as part of 2010’s Patient Protection and Affordable Care Act and the first Medicare Shared Saving Program (MSSP) ACOs were authorized in 2012. Since then, the accountable care organization has continued to evolve and is now a cornerstone of Centers for Medicare & Medicaid Services’ (CMS) efforts to enhance quality and bring down costs across the Medicare and Medicaid programs. 

How many ACOs exist?

In 2022, 483 MSSP ACOs were serving more than 11 million Medicare beneficiaries nationwide. In 2021, 14 states had developed ACO models for their Medicaid beneficiaries. 

How do ACOs work? 

Health systems, hospitals, specialists, physicians, and other providers voluntarily coalesce to take collective responsibility for coordinating and administering care for a set population group on behalf of a specific payer. If the providers are able to reduce costs of care while maintaining established quality benchmarks, they share in the savings achieved. Central to the ACO approach is “reliable and increasingly sophisticated measurement of performance” to support continued improvements in care quality and cost reduction.

What are the types of accountable care organizations available?

Yes. A wide variety of ACO pilot projects focusing on, or incorporating, different incentive mechanisms, disease states, provider types, and patient populations have been launched by CMS since 2012. Many of these demonstrations have concluded or been superseding by newer approaches. Large commercial payers also have developed an array of healthcare accountable care organizations. 

Among the newest CMS ACOs are the ACO REACH (Realizing Equity, Access, and Community Health) model, which replaces Global and Professional Direct Contracting (GPDC) and Kidney Care Choices (KCC). Both are designed in part to strengthen health access and equity for underserved populations.  

How do ACOs impact providers?

ACOs can join either one-sided/upside-only risk or two-sided/downside risk models. In one-sided models, providers share in savings if overall spending for aligned beneficiaries falls below a pre-established benchmark. In two-sided models, providers are financially penalized if spending exceeds the benchmark. 

Do ACOs save money? 

After years of minimal savings, the MSSP ACO model appears to be gaining traction. In 2020, MSSP ACOs collectively earned $2.3 billion in shared savings payments while saving the Medicare program about $1.9 billion. The results represented the fourth consecutive year of ACO net savings for Medicare. According to CMS, 67% of ACOs shared savings with CMS in 2020; 88% of two-sided ACOs earned shared savings payments and 55% of one-sided ACOs earned shared savings payments. 

How do ACOs improve quality?

Because shared savings payments are contingent upon successfully achieving or exceeding quality standards, continued increases in shared savings reflect quality improvements. An August 2017 Office of Inspector General report found that in the first three years of the MSSP program, accountable care organizations improved their performance on most quality measures and outperformed fee-for-service providers on 81% of quality measures. 

Should physicians lead ACOs?

Because robust primary care is central to prevention, early intervention, and continuity of care, primary care physician leadership is important for ACO success. While hospital-led ACOs may be better capitalized and more capable of realizing savings across the continuum, they may also be inclined to see primary care networks largely as referral channels for specialist and in-patient care. This approach can undermine the ACO’s central tenant of reducing utilization through preventive, patient-centric care.

How can providers succeed in ACOs?  

Because success hinges on achieving cost reductions without sacrificing care quality, it is essential for providers to harness data that illuminates quality and cost at all levels of care. That means tracking the performance of specialist and primary care organizations to ensure they’re consistently providing medically necessary, cost-effective care. 

What makes an ACO successful?

Other strategies for ACO success include: 

• Expanding care access with extended hours, particularly for primary care. This can reduce expensive specialist-first or emergency department visits.
• Create integrated care teams to help ensure streamlined coordination between providers, as well as improved patient engagement and adherence. 
• Emphasize wellness with annual visits that include comprehensive screenings and support healthy lifestyle patient education. 

What are key ACO considerations for payers? 

Payer-provider relationships frequently are marked by mutual suspicion and mistrust. However, for an ACO to work, trust is foundational. Without it, the accountability, common goals, shared incentives, and data interoperability upon which an ACO is built are impossible. Beyond effective measurement, robust member engagement is central to strengthening prevention and care continuity. 

What’s next for ACOs? 

Earlier this year, CMS announced a new and improved ACO model designed to help achieve healthcare equity through high-quality, affordable, person-centered care. The ACO REACH will launch Jan. 1, 2023, and run through 2026. It will require all participating accountable care organizations to have a robust plan in place to meet the needs of beneficiaries in historically underserved communities while making measurable changes to address health disparities. 

Other elements of the ACO REACH model include policies to ensure doctors and other providers play a central role in leadership and governance, and more aggressive screening of ACO REACH applicants’ experience, ownership, leadership and financial interests. 

Will all patient or member populations benefit from the new model?

Some question if the capitated payment approach used in REACH might adversely impact seniors and those with disabilities by restricting care without patients’ full understanding or consent. Seniors will be automatically enrolled in REACH ACOs if their primary care provider elects to participate in the model, and therefore could opt out only if they changed doctors. Those who question the capitated payment approach wonder if this could prove problematic in rural areas and other underserved areas.  

Is more information on ACOs available?

General information is available on the CMS website. More details about ACO REACH are available in the CMS Request for Applications (RFA) dated 2/24/2022. RTI Health Advance has published a separate article where the differences between the ACO DC and ACO REACH models are outlined, again drawing on publicly available information.

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