Glossary Term

Accountable Care Organization

An accountable care organization, or ACO, is, in its original use, an integrated medical care network that accepted a payment model adjusted based on progress toward specific health care quality improvements and patient spending reductions. “Integrated” in this context refers to a group of physicians (and related personnel) where a comprehensive array of treatment is provided. The integration of health care providers was assumed to produce efficiencies through superior coordination of patient treatment.

In late 2011, a regulation was finalized relating to the Affordable Care Act’s application of ACOs to the Medicare program. The regulation implemented rules pertaining to “Medicare payments to providers of services and suppliers participating in Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program (MSSP).” In the MSSP, ACOs not only received their normal fee-for-service payments under Original Medicare but were eligible for added compensation if the ACO’s quality and savings requirements were satisfied. Such a reimbursement arrangement is referred to as an alternative payment model (APM).

According to the National Association of ACOs, there were 483 ACOs providing care to over 11 million Medicare beneficiaries as of 2022.

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