What is an ACO?

The Accountable Care Organization concept is one that is evolving, but generally, an ACO can be defined as a set of health care providers-including primary care physicians, specialists, and hospitals-that work together collaboratively and accept collective accountability for the cost and quality of care delivered to a population of patients.

An ACO potentially could be formed around a variety of existing types of provider organizations. 

Many multispecialty medical groups, physician-hospital organizations (PHO), and organized or integrated delivery systems already function as ACOs or have the management and/or payment structure required to quickly evolve into an ACO. 

Other provider organizations, such as tightly managed independent practice associations (IPAs), are also likely candidates to become ACOs but some may require more time and/or infrastructure support to provide the care and cost benefits of an ACO. 

The Affordable Care Act's most significant contribution to creating ACOs is in the traditional Medicare fee-for-service system.  The law includes a provision that allows Medicare to reward healthcare organizations with a share of the savings that would result from improving care quality and reducing the cost for their eligible Medicare populations.. 

To participate in this "shared savings program," healthcare organizations need to become Accountable Care Organizations (ACOs).

The Centers for Medicare and Medicaid Services (CMS) are currently testing several models of care delivery re-design that aim to improve the efficiency of American healthcare systems, improve quality, and contain costs-in other words, to provide accountable care. 

These include such initiatives as the Advanced Payment Incentive, Pioneer ACO demonstrations, in addition to the Medicare Shared Savings ACO program.