What is Accountable Care Organization (ACO)?

Accountable Care Organization (ACO) are voluntary coalitions of hospitals, doctors, and other healthcare providers that work together to provide Medicare patients with coordinated, high-quality care. In order to minimize needless duplication of services and medical errors, coordinated care helps guarantee that patients, particularly those who are chronically ill, receive the appropriate care at the appropriate time.

When an Accountable Care Organization is successful in providing high-quality care and managing health care costs more effectively, it will receive a portion of the savings it makes for the Medicare program.

Accountable Care Organization (ACO) effects on patients

Patients who see physicians who are members of Accountable Care Organizations can take advantage of coordinated care, which facilitates communication amongst all members of the patient’s healthcare team. They receive notification of the duplication, for example, when both a primary care physician and a specialist prescribe the same medication

To ensure the prevention of any harm, we promptly inform them if a specialist or provider prescribes conflicting medications. Because electronic health records are accessible to all healthcare providers, patients also spend less time filling out medical paperwork.

A patient receives treatment from members of that specific Accountable Care Organizations for all of their appointments and tests, all under one roof. In order to control costs, a primary care physician will refer a patient to an Accountable Care Organizations specialist if the patient needs more information from a specialist. Patients are required to pay more if they seek additional care outside of the ACO.

Medicare rights are upheld for fee-for-service patients who visit a healthcare provider that is a part of a Medicare Accountable Care Organizations.

The impact of ACO on hospitals

Studies indicate that not all Medicare value-based purchasing programs show improvements for hospitals that are part of an Accountable Care Organizations. According to the American Journal of Managed Care, hospitals that took part in an ACO outperformed non-ACO hospitals in the Hospital Value-Based Purchasing (HBVP) program run by CMS, but not in the Hospital Readmissions Reduction Program (HRRP) or the Hospital Acquired Conditions (HAC) Reduction program.

CMS pays hospitals incentives under the HBVP program in proportion to how closely they adhere to best clinical practices and how well they improve a patient’s experience while they are in the hospital.

Quality payments are given according to the degree to which a hospital improves on a given measure over its baseline (improvement) or performs well on a measure relative to the national average (achievement).

The HRRP financially rewards hospitals for reducing avoidable readmission rates. According to the HRRP, hospitals should minimize readmissions for specific conditions such as heart attack, heart failure, pneumonia, and chronic obstructive pulmonary disease

If a hospital performs poorly with regard to conditions that are acquired in the hospital, like an infection, it will be penalized under the HAC program. Enhancing inpatient safety is the aim of this program.

Key Components of Accountable Care Organizations (ACO)

  • Provider Collaboration

A cornerstone of Accountable Care Organization is the collaboration among healthcare providers. By breaking down silos and fostering communication, Accountable Care Organization ensure that each member of the healthcare team is on the same page, working towards common goals.

  • Care Coordination

Accountable Care Organizations (ACO) prioritize care coordination, aiming to streamline patient care across various healthcare settings. This not only reduces redundancies but also ensures that patients receive the right care at the right time.

  • Quality Metrics and Performance Measurement

Quality metrics and performance measurement are integral components of Accountable Care Organizations By establishing clear metrics and regularly assessing performance, Accountable Care Organization can continuously improve their services and demonstrate value to both patients and payers.

Key features of an ACO include:

  • Accountability

Accountable Care Organization are accountable for the overall health and well-being of their assigned patient population. They are responsible for coordinating care, improving quality, and managing costs.

  • Payment Models:

Accountable Care Organization often operate under alternative payment models, such as shared savings or shared risk arrangements. In shared savings, if the Accountable Care Organization (ACO) is able to achieve cost savings while maintaining or improving quality, they may receive a portion of those savings. In shared risk, the ACO may also bear some financial responsibility if costs exceed established targets.

  • Data Sharing and Coordination

This program rely on robust data-sharing mechanisms to coordinate care effectively. This includes sharing patient information among different healthcare providers within this program to ensure a comprehensive and cohesive approach to patient care.

  • Quality Metrics:

Healthcare organizations usually undergo assessment through diverse quality metrics, including patient satisfaction, preventive care, and the management of chronic conditions, with the achievement of these metrics often linked to financial incentives.

  • Population Health Management:

A key focus of this is managing the health of the entire population they serve. This involves identifying and addressing the health needs of individuals and implementing strategies to improve overall health outcomes.

Advantages of ACOs

As of now, one of the main advantages of Accountable Care Organization is their capacity to lower healthcare costs. According to the Office of the Inspector General, as of 2017, ACOs that took part in CMS’ Medicare Shared Savings program cut spending by roughly $1 billion over the course of three years.

Accountable Care Organization also performed marginally better than fee-for-service providers and raised patient care quality (82% vs.81percentage) according to CMS-established quality metrics.

Cons of ACO

One of the disadvantages of an Accountable Care Organization is the possibility of disagreements over decision-making and how to divide a patient’s bill. This may give healthcare professionals the impression that they have lost control over how they treat their patients. The methods by which referrals can be made may also be restricted.


User accountability is at the heart of the evolving paradigm of Accountable Care Organization. As healthcare continues to advance, the collaboration between providers and users becomes increasingly pivotal. Accountable Care Organization (ACO), with their focus on user accountability, are steering the industry towards a future where individuals actively participate in their healthcare journey, resulting in improved outcomes and a more sustainable healthcare system.

Scroll to Top