Next Steps for ACOs

Will this new approach to health care delivery live up to the dual promises of reducing costs and improving quality of care?

What's the issue?

Accountable care organizations (ACOs) are networks of physicians and other providers that are held accountable for the cost and quality of the full continuum of care delivered to a group of patients.

Although the ACO model is being adopted in the private sector, industry observers are keeping a close eye on how it is being implemented within the Medicare program. Under contracts to the Centers for Medicare and Medicaid Services (CMS) authorized by the Affordable Care Act, which will go into effect in April 2012, ACOs will work to improve Medicare enrollees' health while simultaneously constraining costs and will earn annual bonus payments if they succeed.

This new approach is already affecting how other health plans pay providers and resulting in a number of ACO contracts between providers and private health plans. According to the American Medical Group Association, more than 100 of its member medical groups are well positioned to become ACOs under Medicare's Shared Savings Program, and many other providers are likely to be interested in exploring the ACO concept.

This Health Policy Brief provides an overview of ACOs, their origins, and the current status of adoption by Medicare and private health insurance plans.