An accountable care organization (ACO) is a type of payment and delivery reform model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. A group of coordinated health care provider

Health care provider

A health care provider is an individual or an institution that provides preventive, curative, promotional or rehabilitative health care services in a systematic way to individuals, families or communities....

s form an ACO, which then provides care to a group of patients. The ACO may use a range of different payment models (capitation

Capitation (healthcare)

Capitation, is a method of paying health care service providers a set amount for each enrolled person assigned to that physician or group of physicians, whether or not that person seeks care, per period of time....

, fee-for-service

Fee-for-service

Fee-for-service is a payment model where services are unbundled and paid for separately. In health care, it gives an incentive for physicians to provide more treatments because payment is dependent on the quantity of care, rather than quality of care...

 with asymmetric or symmetric shared savings, etc.). The ACO is accountable to the patients and the third-party payer for the quality, appropriateness, and efficiency of the health care provided. According to the Centers for Medicare and Medicaid Services

Centers for Medicare and Medicaid Services

The Centers for Medicare & Medicaid Services , previously known as the Health Care Financing Administration , is a federal agency within the United States Department of Health and Human Services that administers the Medicare program and works in partnership with state governments to administer...

 (CMS), an ACO is "an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it."

While the ACO model is designed to be flexible, Dr. Mark McClellan, Dr. Elliott Fisher and others defined three core principles for all ACOs:
1) Provider-led organizations with a strong base of primary care that are collectively accountable for quality and total per capita costs across the full continuum of care for a population of patients;
2) Payments linked to quality improvements that also reduce overall costs; and,
3) Reliable and progressively more sophisticated performance measurement, to support improvement and provide confidence that savings are achieved through improvements in care.

The ACO-model builds on the Medicare Physician Group Practice Demonstration and the Medicare Health Care Quality Demonstration, established by the 2003 Medicare Prescription Drug, Improvement, and Modernization Act. Kaiser Permanente

Kaiser Permanente

Kaiser Permanente is an integrated managed care consortium, based in Oakland, California, United States, founded in 1945 by industrialist Henry J. Kaiser and physician Sidney Garfield...

 and HealthCare Partners Medical Group

HealthCare Partners

HealthCare Partners is a managed care provider, based in Torrance, California, United States, which operates in California, Nevada, and Florida.-History:1990's...

 are two notable examples of successful ACOs.

While ACOs have become increasingly more common in the last few years, a recent study by the Medical Group Management Association

Medical Group Management Association

The Medical Group Management Association , founded in 1926, is the principal voice for medical group practice management professionals in the United States. MGMA serves 22,500 members who lead and manage more than 13,700 organizations in which almost 275,000 physicians practice.MGMA leads...

 (MGMA) has shown that the implementation of ACOs is one of the toughest challenges facing the MGMA members today.

ACOs in the Affordable Care Act

Section 3022 of the Patient Protection and Affordable Care Act

Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...

(ACA) creates the Medicare Shared Savings program, allowing ACOs to contract with Medicare by January 2012. According to the ACA, the Medicare Shared Savings program, "promotes accountability for a patient population and coordinates items and services under part A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery". Section 3022 outlines the following requirements for ACOs:

• The ACO shall be willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it
• The ACO shall enter into an agreement with the Secretary to participate in the program for not less than a 3-year period
• The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers
• The ACO shall include primary care ACO professionals that are sufficient for the number of Medicare fee-for-service beneficiaries assigned to the ACO under subsection
• At a minimum, the ACO shall have at least 5,000 such beneficiaries assigned to it in order to be eligible to participate in the ACO program
• The ACO shall provide the Secretary with such information regarding ACO professionals participating in the ACO as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements under paragraph (3), and the determination of payments for shared savings under subsection (d)(2)
• The ACO shall have in place a leadership and management structure that includes clinical and administrative systems
• The ACO shall define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies
• The ACO shall demonstrate to the Secretary that it meets patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans
• The ACO participant cannot participate in other Medicare shared savings programs
• The ACO entity is responsible for distributing savings to participating entities
• The ACO must have a process for evaluating the health needs of the population it serves

CMS' Notice of Proposed Rule was released March 31, 2011 for the Medicare Shared Savings program and the Comment period closed June 6, 2011.

ACO Pilots and Learning Networks

A range of ACO pilots are currently underway across the country with commercial insurers and state Medicaid programs (New Jersey, Vermont, Colorado, etc.) in advance of the Medicare Shared Savings Program. The Brookings-Dartmouth ACO collaborative is leading five ACO pilots working with commercial insurers, as well as their second ACO Learning Network with over 80 members from across the country. Premier runs an ACO Implementation Collaborative and Readiness Collaborative. And the American Medical Group Association(AMGA) also runs an ACO Development Collaborative and Implementation Collaborative. Independent ACO-like initiatives are also taking place in Massachusetts, Illinois and California. Recently, the Brookings-Dartmouth ACO Learning Network published a publicly available comprehensive ACO implementation guide, the ACO Toolkit. Working with leading experts, several ACO pilots have also been looked at using the portal system HealthyCircles. It was originally built to manage care transitions around H1N1 for the American Medical Association but some found practical application in the ACO space.