The Basics of ACO’s

The Healthcare industry continues to evolve in the post-pandemic era. The changes are brought about by several factors such that patients are now well aware of their rights and they have easy access to information; not to mention that everyone was hit by a financial blow, therefore cost is carefully considered in getting a care plan. 

Providers, on the other hand, are forced to make necessary pivots in their service from the delivery of care to the improvement of their systems and processes. This could mean increased costs in operation, which makes it more difficult. That is why now more provider organizations are considering becoming a part of an Accountable Care Organization (ACO). To understand ACOs a little better, let’s discuss some of its basics.


What is an Accountable Care Organization?

An Accountable Care Organization is a group of providers that make up a team of hospitals, primary physicians, specialists, allied health professionals, and all other caregivers in the healthcare space. This group of providers chooses a voluntary agreement with a payer so that medical and financial costs can be distributed, and the responsibility of coordinating care for an assigned population can be shared.

What is the difference between An ACO and HMO?

In a way, ACOs are similar to a certain degree to Health Maintenance Organizations (HMOs), which is a type of insurance plan that puts a cap on medical coverage as long as providers and services have an agreement with the HMO. The difference is that in HMOs, providers either receive a fixed monthly salary or an agreed fee-for-service to render services to beneficiaries. This payment setup, however, may encourage providers to reduce utilization which can compromise patient care. 

On the other hand, ACOs include all components that are involved in the service of a beneficiary and the common goal for the entire team is to cut down the cost, improve the quality of care and earn incentive payments.

Payment and Delivery Models for ACO

One of the big concerns of providers is how the payment and delivery for ACO are going to look since most of them are used to the traditional fee-for-service or the HMO retainer compensation. Although ACO is quite new, it is slowly gaining ground, that’s why hospitals and providers continue to examine, pivot and then evaluate it again including the different payment and delivery models that work best. 

If you and your team are planning to join an ACO, it will help to check the participation of other providers in your area. It is important to note the readiness of the community before switching to ACO. To learn more about ACO participation in your area by hospital or region, click this link and hover over the 2020 AHA Annual Survey Database.

What are the different types of ACO Programs?

Different types of ACO are available through Medicare programs and they include:

  • Medicare Shared Savings Program (MSSP) – this program’s goal is to achieve better individual health, greater population health, and lower utilization expenditure.
  • Medicare-Medicaid ACO Model – enables MSSP ACOs to be responsible for the quality of care and reduction of costs for Medicare-Medicaid enrollees
  • Next Generation ACO Model – permits providers to take more financial risk than other ACO programs
  • ACO Investment Model – evaluates prepayment methods that support MSSP ACOs
  • Vermont All-payer ACO Model – incentivizes savings and quality among Vermont payers

What are the advantages and disadvantages of joining an ACO? 


  1. Encourages higher quality of care at lower costs. Although the risk is shifted to providers, they can earn from the incentives provided in value-based care.
  2. Avoidance of unnecessary utilization and prevention of medical errors as the ACO team efficiently collaborates.
  3. Provides an alternative payment option besides the traditional fee-for-service system.
  4. Promotes providers to partner with other care contributors across the care continuum. Some providers are acquiring or merging to have an advantage over a wide range of services, achieve an economic surplus, and access the technology, data, and clinical capabilities of their peers.
  5. Puts a premium on prevention and wellness through incentive payments and financial risk arrangements.
  6. Supports government programs that help improve population health, shorten length of hospital stay, and keep patients out of the hospital or diagnostic room when relevant.
  7. Offers a great opportunity for provider incentive payments. 



  1. In certain models, providers may be liable to pay back losses if their costs exceed these spending/utilization benchmarks.
  2. According to critics, ACO value-based care programs are reducing competition in the healthcare industry.

How to thrive in an ACO environment?

In the initial transition period, providers need to have an open mind to change, because resistance may mean losses. So the first step is to build or be part of a robust network that can provide quality care, reduce utilization costs, and wide channel of services. When this is set in place, patients are kept within the network avoiding consultation with non-affiliated providers at a minimum. Another component that needs to be thought through is post-acute care, which when done efficiently, can prevent hospital readmissions, and ultimately bring down the cost. 

Maximizing the role of the coordinators aka navigators can help patients after discharge to get the best care and providers to succeed in the goals of the risk-based contract.

“One of the keys for us in providing post-acute follow-up is identifying patients that our care transition coordinators will follow from the time they’re an inpatient at a Mercy Health facility through any additional care they will need beyond,” Ron Drees, director of post-acute care services, Mercy Health

Keeping track of patients as they are discharged from the hospital and as they move from one facility to the next for follow-up consultation and diagnostics will keep data and health information updated. In cases like this, the use of technology is critical to keep track of all the moving parts. The best example is the HCC Assistant which keeps everyone on the team in the loop and all documentation and coding very accurate.

“The biggest challenge that you have in the care model is being able to get access to the data. We have so many disparate data sources. We try to capture information from so many different care entities, whether it be hospitals, specialists, skilled nursing facilities, or other primary care facilities.” Jeffery Nelson, CIO, Millennium Physician Group

Where can I get more information about ACO?

To get more details about ACOs and to get access to forms or groups that you can join, visit the Centers for Medicare & Medicaid Services (CMS) website. CMS provides several learning tools and opportunities for providers and organizations on how they can seamlessly transition to an Accountable Care Organization that is appropriate for you and your patient’s needs.

You can also visit the CMS Innovation Center website or the Medicare Shared Savings Program website to get updates about the latest opportunities.

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