ACOs were set up under the Medicare Shared Savings Program as part of the Affordable Care Act. Providers do not have to form ACOs, but those who do have the opportunity to keep part of the money saved if they meet certain quality and economic goals. ACOs take responsibility for the care of a minimum of 5,000 Medicare patients for three years and, unlike health maintenance organizations, are sponsored by physician groups or hospitals working in coordination with each rather, rather than insurers. However, Medicare beneficiaries who are part of an ACO remain free to seek care from any provider anywhere.
The current system pays on a fee-for-service (FFS) basis and would continue to pay the doctors and the hospitals running the ACO as it now does now, but it would measure the total costs for each patient cared for and compare that with patients who are not covered by an ACO. There would be a benchmark for the ACO, and its performance would determine whether it shared in savings (because it costs Medicare less than the cost of patients in the regular system) or must share in losses (because it costs Medicare more than for regular patients). There will be two risk models: one in which savings only are shared in the first two years, and then savings and losses are shared in the third year. In the other model, the ACO will share both savings and losses with the government in all three years. It is expected that 860,000 of the 46 million Medicare beneficiaries will be involved in ACOs starting in April 2012.
Accountable Care Organizations (ACOs) receive financial bonuses when they meet quality and cost benchmarks, and evidence from the Centers for Medicare & Medicaid Services (CMS) Physician Group Practice (PGP) demonstration suggests that the 10 physician organizations were able to meet their performance benchmarks and quality measures. ACOs also provide an improved structure for coordinating care and will hopefully give providers the incentive to “reduce duplication of services, invest in infrastructure like health information technology, redesign care processes, and practice with greater adherence to clinical evidence of what treatments work best,” which are goals of the Affordable Care Act (ACA) that should improve the quality of health care across the United States, as well as for Medicare beneficiaries. However, Medicare beneficiaries who are part of an ACO remain free to seek care from any provider anywhere.