What is an Accountable Care Organization?

Accountable Care Organizations (ACOs) are networks of doctors, hospitals and other healthcare providers that voluntarily collaborate in order to provide coordinated, high-quality and cost-effective care to patients. ACOs came into being as a result of the enactment of the Affordable Care Act (ACA) of 2010, more commonly known as Obamacare. This Act led to the creation of the Medicare Shared Savings Program (MSSP) that sought to improve the quality of care for Medicare Fee-For-Service (FFS) beneficiaries, while also reducing unnecessary costs. Although Accountable Care Organizations were first set up to exclusively cater to Medicare participants, these organizations have since expanded their operations to also include private payer networks.

Back To: MANAGEMENT

How are Accountable Care Organizations Used?

Accountable Care Organizations (ACOs) were conceived as a well-connected network of healthcare providers that shared information within themselves (thus eliminating duplication of services), offered more accessible and affordable healthcare and prevented medical errors. Although ACOs are designed with a focus on primary care physicians (PCPs), they also incorporate hospitals, specialty clinics, dispensaries and other healthcare providers in order to optimize their capabilities. The basic framework of Accountable Care Organizations was incorporated into the Medicare Shared Savings Program - a constituent of the Affordable Care Act (ACA) of 2010. This Act made it mandatory for each ACO to service a minimum of 5,000 patients over a minimum three-year period. The Centers for Medicare and Medicare Services (CMSs) oversee the functioning of all ACOs. Although originally envisaged by the Obama administration as a government-maintained social welfare program for low-income groups, the ACO system quickly transcended its Medicare roots to incorporate private payer networks. However, all Accountable Care Organizations have retained the fee-for-service payment model of Medicare, albeit with certain modifications such as offering incentives to healthcare providers for better care of patients. As of 2014, there were 20 Accountable Care Organizations in the Medicare Pioneer Program and 333 in the Medicare Shared Savings Program (MSSP). These ACOs together generated over $400 million in total savings that year, not counting bonuses paid out.

Accountable Care Organizations in the Present

It is mandatory for ACOs participating in the Shared Savings Program beginning July 1, 2019 and later to agree to an agreement period of no less than five years. This agreement period constitutes performance years that follow similar operational procedures. The Accountable Care Organizations can opt from either of two tracks -

• A Basic track that comprises a glide path for eligible ACOs
• An Enhanced track that caters to higher risk levels as well as higher potential rewards.

It is possible for ACOs participating in the Basic tracks glide path to graduate to higher risk levels and consequently, higher potential rewards.

Disadvantages of the Affordable Care Organization System

ACOs participating in the Shared Savings Program can lead to consolidation among healthcare providers in the form of mergers. This will invariably lead to a situation where a smaller number of health systems hold greater negotiating power over insurers, thus resulting in higher expenses for the patients. Patients availing healthcare under the ACO system are also prone to being entangled in an unpleasant network of healthcare providers with vastly limited options.