Accountable Care Organization (ACO)

Key facts

MSSP legal basis

Section 1899 of the Social Security Act, added by the Affordable Care Act

Main Medicare programs

Medicare Shared Savings Program and Innovation Center models such as ACO REACH

MSSP minimum size

At least 5,000 assigned Medicare beneficiaries

Payment basis

Fee-for-service claims, reconciled against a spending benchmark

What is an accountable care organization?

An ACO is a contracting arrangement, not a type of facility. Independent practices, health systems and hospitals keep their own tax IDs and continue to bill as usual, but they join an ACO that takes responsibility for the cost and quality of care for patients assigned to it.

If the ACO keeps spending for its population below a benchmark while meeting quality standards, it shares in the savings. In two-sided risk arrangements, it also repays part of any losses. ACOs exist in Medicare, Medicaid and commercial insurance, but Medicare ACOs are the best documented because CMS publishes their participants and results.

How Medicare ACOs work

In the Medicare Shared Savings Program (MSSP), the largest Medicare ACO program:

• Participants are identified by Taxpayer Identification Number (TIN), and the clinicians who bill through them by National Provider Identifier (NPI).
• Beneficiaries are assigned based mainly on where they receive primary care, or by voluntarily naming a primary clinician.
• Assignment does not create a network: beneficiaries remain free to see any provider that accepts Medicare.
• CMS compares actual Parts A and B spending with a benchmark after each year and applies quality performance to determine shared savings or losses.
• ACO participants must hold at least 75 percent control of the governing body.

Why ACOs matter

ACOs concentrate decisions about referrals, site of care and high-cost therapies in a population health team that is measured on total cost. For pharma, device and diagnostics companies, ACO leadership is a distinct audience from individual prescribers.

For network and market analysis, ACO participant lists show which practices work with which health systems or management companies, a relationship that ownership data alone can miss.

ACO vs Medicare Advantage

An ACO is not an insurance plan. Medicare Advantage plans receive capitated payments and can limit members to a network. Beneficiaries assigned to a Medicare ACO stay in Original Medicare and keep open access to providers. Some provider groups do both, taking risk from Medicare Advantage plans and from an ACO program at the same time.