Primer: What Is An ACO And Why Should I Care?

ACOs are hot. They were the topic of a major federal meeting yesterday. Today they are on the agenda of the Massachusetts panel that’s charged with revamping the health care payment system. Another state panel has already recommended heading toward them. They are causing many concerns. Your health care organization may try to become one. So what are they?

ACO stands for “Accountable Care Organization.” From there, it gets a little amorphous, so amorphous that the confusion — combined with strong federal incentives to go ACO — inspired this hilarious video, already viewed more than 20,000 times:

So I asked Martha Bebinger, WBUR’s great maven on all things health care, for her simplest, most minimalist definition:

Her response:

Picture one system that offers and coordinates all the health care you need. The most important person in the system is your primary care doctor. When you need something he or she can’t provide, your doctor refers you to a cardiologist or cancer specialist or eye doctor and continues working on your case with that specialist. You would get all the tests you need within the same health system and go to a hospital, if needed, all under the same health care umbrella. That’s an ACO, everything you need under one umbrella. Patients can get care outside the umbrella, but it would probably cost more.

Some patients love the idea of a “home” and someone who guides them through the health care system. Other patients don’t like the idea of limiting where they can go for care. Some doctors like and are comfortable collaborating on a patient’s care. Others say “team” care is unwieldy. And then there are the financial challenges of making a health care system that offers all things to all people work.


If your eyes don’t glaze over when you hear words like “capitation,” here’s an excellent briefing on ACOs from Health Affairs. Kaiser Health News does its simpler, more accessible version here. At its core:

In the existing fee-for-service payment system used by Medicare and most private insurers, doctors get paid more by giving more services, and hospitals make more by increasing admissions. With ACOs, doctors and hospitals would get paid based on their ability to hold down overall costs and meet quality-of-care indicators. In effect, their pay would be based on improving care, not driving more of it.
If the ACOs fail to meet certain quality and cost savings targets, the providers in the ACO would face lower payments from Medicare. On the flip side, the ACOs would also be awarded for keeping patients happy and meeting national quality standards such as making sure diabetics get regular foot exams and women get their annual mammograms.
In effect, ACOs are an attempt to buid integrated health systems like the Mayo Clinic where none exist. But Mayo took several decades to become a global destination for health care. The studies of ACOs called for in the congressional proposals aim to see if one can be formed in a year or two.

Here’s yet another take, from today’s Huffington Post. Dr. Paul Grundy, IBM’s director of health care, technology, and strategic initiatives, writes:

In ACOs, doctors are accountable for improving the health of their patients. ACOs tap into existing communities of physicians and other health professionals in order to build a stronger team culture. In these practices, doctors are rewarded for meeting targets that improve outcomes and lower costs. Their benchmarks are set to regional, not national standards, so that local factors impacting health can be taken into account.

And he adds: I am eager to see the results from the pilot studies now underway. I believe the ACO concept, allied with the medical home model, has the potential to transform U.S. health care.

Note: This primer is a work in progress. Contributions in comments welcome!

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