Accountable Care Organizations – What Why Who When


Author:  Shahid Shafi, MD, MPH, Surgical Group of North Texas, Grapevine, TX

Currently, health care delivery in the United States is fragmented and expensive with $2.6 trillion spent on national health care expenditures annually. This accounts for almost 18% of the gross domestic product, higher than any other country.1 Despite this level of spending, the United States ranks 37th in the world in performance.2 Our current health care system focuses on treatment of diseases rather than maintenance of health and wellness.  Care of individual patients is fragmented between primary care physicians, specialists, hospitals, and other providers, with little coordination. Another problem inherent in the current fee-for-service model is the incentive for overutilization. These factors contribute to a system that is vulnerable to duplication of services, higher cost, and lower quality.

What is an Accountable Care Organization?

The Accountable Care Organization (ACO) is a health care delivery model, proposed in the Patient Protection and Affordable Care Act of 2010, to achieve efficient and effective high quality health care at lower costs. An ACO is an integrated group of health care providers working together to provide a continuum of care for the patients that will improve quality and reduce cost of care (Figure 1). These providers include primary care physicians, specialists, hospitals, post-hospital facilities, and home health.3

Patient benefits of ACO

There are two key features of an ACO: integration of care and value-based payments.

Integration of care requires a network of providers that utilize electronic health records (EHR) which meet specific interoperability standards and allow access to patients to their health information, in a private, secure and confidential environment.4 Interoperability allows sharing of patients’ medical information between different providers, which is essential to coordinate care of the patients and minimize duplication of services and tests.

Value-based payment systems will require a change from the current “fee for service” model to a “fee for value” system that rewards better patient outcomes instead of utilization of services. Under this system, quality of care will be measured using benchmarks that have been defined by the Centers of Medicare and Medicaid Services (CMS) and are summarized in Figure 2.5 Thirty-three quality benchmarks in four domains will be used to measure quality of care: (1) patient experience of care, (2) care coordination/patient safety, (3) preventative health, and (4) at-risk population/frail elderly health. Implementation of these quality metrics will require a robust infrastructure to ensure adoption of best clinical practices, obtain quality metrics, and to track patient outcomes.

There are three models of value-based payment systems that are currently under investigations: pay for performance, bundled care, and shared savings. Pay for performance model will require health care providers to meet certain quality benchmarks before they receive full payment for their services.  Bundles care payment model will provide a single payment for a well-defined episode of care, such as an elective surgery, that will be shared by all providers involved in that episode of care. Shared savings model will reward providers with savings that may be generated by reducing cost of care while achieving quality benchmarks. Each of these models of payments has its own risks and benefits. ACOs will likely use a combination of these models.

What is the current status of ACOs?

Across the nation, physician groups, individual hospitals, and local health care systems have initiated a number of pilot projects. These projects are funded by local health care systems, large employers, commercial health insurers, and CMS. Common elements of all ACOs are the following:

  • A network of providers is established.
  • One or more models of payment are adopted.
  • An integrated electronic health record system is implemented across the providers.
  • Quality metrics, as well as information systems to measure them, are defined and established.
  • Patients are assigned to the ACO based upon their current providers and insurance plan.
  • Reports on cost and quality are developed and shared in a transparent manner.


Accountable Care Organizations established by the Affordable Care Act will likely have a major impact on health care delivery in the country. Seniors on Medicare will be assigned to an ACO over the next few years. While the goal of this delivery model is to improve the quality of care and reduce cost, it will also reduce choices for patients. Hence it is imperative for everybody to educate himself or herself on how it will impact them.

Figure 1: Accountable Care Organization – Conceptual Framework

Managing Care Transitions

Align Physicians

Reduce Cost of Care

Managing Care Transitions

Align Physicians

Reduce Cost of Care

Figure 2: Quality Benchmarks

*At-risk population is defined as patients with one or more of the following diseases:  diabetes, heart failure, coronary artery disease, hypertension, ischemic vascular disease.


  • Centers for Medicare & Medicaid Services, Office of the Actuary. [Accessed April 13, 2012]
  • World Health Organization – World Health Organization Assesses the World’s Health Systems. [Accessed April 20, 2012]
  • Centers for Medicare & Medicaid Services, ‘Affordable Care Act in Action at C.M.S.’ <> [Accessed March 21 2012].
  • HITECH Act Enforcement Interim Final Rule. [Accessed April 23, 2012].
  • Desmararais, H.R. (2012). “The Medicare Shared Savings Program. Bulletin of the American College of Surgeons 97(3): 7-12.

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