Accountable Care Organizations (ACO)

Accountable Care Organizations (ACO)

The Accountable Care Organization (ACO) is a by-product of the Affordable Care Act (ACA). In 2011, the U.S. Department of Health and Human Services released rules to form the first 32 ACO’s, known as the “Pioneer ACO’s”.  The concept was simple: align payors and providers with mutual financial rewards for better outcomes at a lower cost.  The pioneers agreed to a three-year trial with a minimum of 5,000 patients and aligned to 33 performance metrics set by the Centers for Medicare and Medicaid (CMS) under the name of The Medicare Shared Savings Program. The initial goal was federal savings of up to $940 million over the first four years.

The initial participants have experienced some bumps in the road and over half ended their involvement after their first three years of participation.

However, other models of ACO’s now exist with either one-sided or two-sided financial risks.[1] ACO’s now play an expanded role under MACRA and Medicare’s QPP discussed below.

My Summary Analysis of Accountable Care Organizations


  • Payment reform that makes sense and pools risks
  • A step in the right direction.
  • Started small with projects to get results
  • CMS and the participants learned from the Pioneer experience

The BAD:

  • Pioneer ACO’s did not see the rewards they had expected. Some related to patient pools, others to benchmarks.[2]

Overall, CMS and the Pioneer ACO’s did a great service sharing some risks and helping the industry shape future directions for value-based healthcare..


[1] According to CMS in April 2016 there were 433 Medicare ACOs.  Most are one-sided risk, which means they have a both a limited downside and upside risk. Two-sided models take full downside/upside risk with Medicare. Source

[2] As one officer of a Pioneer ACO confessed to me on why they were leaving the pioneer model, “We were able to show improvements from our baseline, but not as great as the national benchmarks.  This may be related in that we are in a high-cost environment to start and needed to move the bar more than others. So we made the investments, but saw now of the expected rewards.”

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