What Is an ACO and How Does It Work?

Healthcare in the United States can be difficult to navigate, whether you have insurance or not. Medical professionals and patients share the same common goal of wanting to have a system that efficiently manages treatment, eliminating the waste of money that comes with medical errors and duplication.

This is where ACOs come into play. With over 600 in the United States as of 2018, it’s obvious that they’re growing and for good reason. While the system is still imperfect, these organizations bring a positive upside for patients and healthcare providers alike.

Let’s take a look at how they’re changing the medical industry.

What Is an ACO?

ACO stands for Accountable Care Organization, and it’s a group of healthcare professionals that work together to provide quality care at a lower cost to the patient. These networks often include primary care physicians, specialists, nurses and hospitals that voluntarily come together to treat patients and share information among each other to create and enforce a comprehensive treatment plan.

The primary purpose of an ACO is to improve the quality and efficiency of health care that Medicare patients receive. This, in turn, saves both the patients and providers money.

Additionally, and probably most importantly, it aims to control the amount of waste in the Medicare system. This includes patients seeing more than one specialist for the same condition and undergoing the same tests, as well as excessive visits.

Saving the Medicare system money benefits everyone, especially taxpayers. In 2014, there was approximately $46 billion in wasted money, simply from payment errors. This number decreased to $31 billion in 2018, a staggering 32 percent reduction in just 4 years.

How Does an ACO Work?

With an ACO, unlike traditional doctor visits, the healthcare professionals work together. The main perk is that there’s no fragmented care. Wherein traditional medical care has patients shuffling between doctors to get care without any shared plan, an ACO bands together.

This results in consistent monitoring of medical results, no matter what type of physician or specialist the patient visits. Additionally, the level of care is so significant that the patients are truly partners in the treatment plans.

An ACO is not a healthcare or insurance plan and shouldn’t be mistaken for one. Patients who use the organization will still need to have medical insurance or be responsible for self-pay. While there are some private organizations, ACOs typically provide care to Medicare patients.

What Is Accountable Healthcare?

Accountable healthcare is the process of consolidating treatments into an easy-care plan that keeps medical professionals in the loop about a patient’s care. All of the information is in one centralized location so that providers can look at test results, schedule appointments and adjust treatment plans.

Accountable healthcare is aimed at eliminating the waste that comes when patients visit more than one provider and one hand crosses the other, rather than working together and eliminating the need for unnecessary tests and treatments.

Elements of a Successful ACO

There are a few elements that make an ACO successful, both for its partners and its patients. These involve several aspects including personnel, payment models, tracking systems and meeting patient needs.


Personnel starts at the top, and one of the most important parts is the leadership. Leadership should be positive, forward-thinking and encouraging in helping the healthcare professionals acclimate to structure and payment changes.

Additionally, practitioners may be initially resistant to changes in infrastructure as well as payment models, which can cause issues. However, strong leadership is able to solve these qualms as they arise.

When it comes to hiring personnel, it’s important to only hire the best. Whether it’s physicians, nurses, specialists or health counselors, having qualified staff on hand who know how to centralize patient treatment will only benefit the ACO.

Payment Models

Payment models are one of the most important things that an ACO has to set up and organize. Most have a fee-for-service model, which offers a flat rate for a specific service.

In the past, there were concerns about providers billing for services they didn’t render, in order to inflate payments they received. However, with quality standards of care, this is no longer the case.

Bonuses help increase revenue, and patients get more personalized, detailed care making it a win-win for both parties involved.

There are several payment models, including Medicare Shared Savings Program (MSSP), Advanced Alternative Payment Model (APM) and the ACO Investment model. Each of these has a variation in structure in terms of how they pay out bonuses — i.e. the quality standards they must meet — and how much in bonuses an ACO can earn.


IT infrastructure is a very critical component of an ACO. It makes it possible for all providers to be on the same network, sharing and accessing the same information. Without a reliable infrastructure and integration of services, service becomes inefficient.

Without a collaborative network, reporting and analytics become impossible to reconcile. The infrastructure is what providers rely on as the backbone of the ACO and it includes IT network, data mapping and consolidating multiple systems into one single unit that holds the key to all treatment and patient information.

Health information technology, or HIT, is vital to fulfilling all of the objectives of accountable healthcare.

National ACO vs Regional ACO

There are two main types of ACOs: national and regional. The main difference when it comes to these two is the locales that they cover. Regional organizations tend to focus on a narrowed location, such as a specific state or metropolis.

National organizations, on the other hand, span multiple states making it easy for patients who move to maintain the same level of care while remaining in the same ACO that’s providing their care, providing they move to an area that their organization serves.

Pros and Cons of Accountable Care Organizations

As with any type of healthcare organization, ACOs come with a set of pros and cons. They’re actually very beneficial, but they’re not without their downsides. Let’s take a look at these upsides and limitations.


One of the most important pros is the increased level of care for a patient. This is especially true for those who have chronic conditions and need ongoing treatment.

Another upside to these types of organizations is that they’re designed to reduce medical expense, particularly those that come from double billing because of duplicated services. Doctors benefit from these savings, too, and they’re often incentivized for reducing costs across the board.


There are a number of downsides to an ACO, as well. For example, while it’s easy to look at the financial benefits as a positive, it also presents as a negative in some instances. While the cost-savings look good on paper, they don’t include the initial setup costs, which can be very expensive when it comes to establishing an organization. Many times, it ends up being a financial wash.

Meeting Requirements

One of the cons, at least on the healthcare side, is that there is an increasing number of requirements that these organizations must meet. For patients, this is extremely beneficial, but for medical professionals, it can be time-consuming and exhausting. Reassessments occur all the time, and as weak points are discovered, they become points of contention in the list of requirements.

Many feel that over time, these requirements will become overwhelming and potentially impossible to meet.


Implementation is another major concern for healthcare professionals, who need a system in place to access and share all information about patients. These systems, known as EMRs, tend to be costly to implement and some up-and-coming ACOs may not be able to bear the costs involved.

Potential Monopolies

Patients have a right to be concerned about monopolistic tendencies. For example, for an ACO to receive its benefits the organization must treat at least 5,000 patients with Medicare.

When healthcare professionals consolidate, it’s not uncommon in less densely populated areas for the ACO to be the only source of medical care. In this instance, patients may worry about increased costs of care when there are no other medical facilities around to compete.

Why Should I Care About ACOs?

Whether you’re a medical professional or a patient, there are many reasons to care about ACOs. First is that it defines the level of care that each person receives.

ACOs have been proven to be more effective when it comes to administering and monitoring treatment. Secondly, they reduce costs across the board. There’s less money paid out of pocket and efficient organizations cut down on duplicity when it comes to medical testing and ineffective treatments.

Biggest Benefits of an ACO

There are a number of benefits that come with working with an ACO, for both providers and patients. These benefits are broken down by group as follows.

For Physicians

Physicians who agree to be part of an ACO do so because it benefits them more in the long run. It’s not about making more money, it’s about working smarter, not harder and when you have an efficient organization system backing you up, that becomes possible.

Improved workflow is a plus because it makes navigating between patients simple. With all of the pertinent information at hand through case management systems and access to improved protocols, there’s a lower risk of medical mistakes.

The final benefit is the ability to participate in the ACO’s leadership, contributing to areas of strength or specialty to help nurture the organization’s growth and efficiency.

For Hospitals

Like physicians, hospitals benefit from belonging to an ACO as well. They usually end up with decreased costs along with increased efficiency, which is a win-win all around.

Community providers and physicians tend to be onboard with the practices, which result in improved relationships and a lower turnover rate. Additionally, the outcomes of treatment plans are typically more quantifiable, which leads to greater patient satisfaction.

For Patients

While medical providers and healthcare agencies benefit from ACOs, the true winners are the patients. Instead of having to travel between providers who don’t share information or collaborate, they get the benefit of having all of their information available at a single access point.

This means more attention to care and more specialized care with fewer out of pocket expenses. Patients work with their healthcare team and typically experience better overall results with this collaboration.

What Is “Attribution” When it Comes to ACOs?

When it comes to ACOs, you’ll likely hear the term attribution. This term simply refers to the process of assigning one or more providers to a patient.

These providers, in turn, are responsible for the overall level of care that a patient receives, even if they receive services from other healthcare professionals.

Are There Different Types of Attribution?

There are different types of attribution, yes. The most common types you’ll hear about include:

  • Prospective
  • Retrospective
  • Single
  • Multiple
  • Majority
  • Plurality

Each of these types varies in how the attribution is assigned. For example, prospective and retrospective attribution both rely on historical claims but use them in different ways.

Prospective attribution is used in pre-pay cases and when looking to implement changes in a patient’s care before the period begins, whereas retrospective attribution is completed at the end of the patient’s care or at the end of a marked period, normally a quarter or 12-month period.

Single attribution occurs when a patient is assigned to a single provider, where multiple attribution assigns the patient’s care to multiple providers. Majority and plurality sound similar, but majority attribution occurs when the assigned provider actually provides the majority of the care.

Plurality attribution is when the patient is assigned to a provider who handles the largest proportion of the patient’s care.

Should I Be Aware of any Concerns About Retrospective or Prospective Attribution?

The most pressing concern with retrospective or prospective attributions is the actual level of care that patients receive. Studies have shown that 17 percent of patients did not receive care when using prospective attributions, whereas 100 percent of patients did with retrospective, or performance-year attribution.

The level of care seems to vary between the two and this is something that patients and providers should monitor simultaneously.

What Is a Benchmark?

A benchmark is a value that’s assigned to a point of reference. Comparisons are made against these established benchmarks to ensure that the ACOs are performing to the standards set forth by the governing agencies.

They’re evaluated regularly and are subject to change as quality standards rise.

What Should I Know About Risk-Sharing Options?

As a medical provider who participates in an ACO, you’re bound to hear about risk-sharing options. Basically, this determines how much of a risk or reward you earn when you sign on to work with an organization.

The more money the ACO saves, the more they’re likely to be rewarded. The same goes for expenditures, however. If the ACO overspends, they have to pay CMS for the expenditures and as such, they take a loss.

However, there are different levels of risk and reward. Some ACO models have a higher percentage of shared savings, but they also run the risk of sharing in more of the expenditures if they don’t reach their target savings.

While on paper it’s beneficial to sign up for an ACO model that offers a higher payout, it’s only a benefit if the organization meets all of the benchmarks. Otherwise, they’re better off with a lower risk-sharing option.

How Many ACOs Are There in the US?

In 2018, there were a total of 649 Medicare ACOs spread across the United States. These organizations provided care for 12.3 million people and with quality standards managed to reduce waste levels.

These organizations are increasing in popularity, however, and the number in operation raises each year. There are several hundred private ACOs as well, but patients are able to opt out of these organizations if they do not wish to seek their treatments in this manner.