ACO (Accountable Care Organizations) – New Buzzword in HealthCare

What are ACOs?

A new buzzword in health care is ACOs, which is actually an acronym for Accountable Care Organizations.  It is one of the pilot programs in the new health care law that is administered by the Center for Medicare and Medicaid Services (CMS) [, 2012].  ACOs are network of physicians and hospitals agreeing to share with the responsibility of caring for patients which has a striking resemblance to the definition and history of health maintenance organizations (HMOs).   ACOs are considered to be the government’s answer in containing the cost of providing health care to the increasing numbers of Medicare eligible “baby boomers” and disabled people (Meise1l & Pines, 2011).  The key word here is “accountable” because ACOs are accountable for managing their own networks of physicians and hospitals, accountable for giving patients the best possible quality of care and accountable for keeping the cost of care down. ACOs will maintain their own report card or quality benchmark and will report to the CMS (Gold, 2012).  This means ACO providers will be dependent on their nurse practitioners, pharmacists and other members of their health care team to monitor appointment compliance, manage medication schedules and oversee lifestyle changes (Sato, Puopolo, & Cornacchio, 2012).

Differences between ACOs and HMOs

On the onset, a lot of similarities can be made between ACOs and HMOs but certainly there are differences. Sullivan (2010) claimed that the principle differences between the two are the size of enrollees and the bearing of the insurance risk.  HMOs have hundreds and thousands of members whereas ACOs will start at a minimum of 5,000 members.  HMOs assume 100% of the insurance risks while ACOs will assume little or none of the insurance risk at least for the first two years.  Thereafter, Sato, Puopolo, and Cornacchio (2012) claimed that ACOs will move to capitation payments like HMOs.  ACO patients as opposed to HMO patients can opt out anytime, there is no enrollment or lock in provision, and patient membership is strictly voluntary.  There is no obligation for patients to stay with their current primary care because they are free to seek care with another doctor, which means no gate keeping or pre-authorization provisions.

Payment Plan for ACOs

The government would still pay ACOs the traditional fee for service (FFS).  Experts argue that the FFS have increased the cost of health care because doctors who ordered more tests and procedures for their patients have gotten substantial amount from the Medicare program.  In this instance, however, ACOs will get one payment from CMS that will cover all the expenses they would incur in caring for their patients. They can keep the leftover sum if they can keep the cost down by making their patients healthy and away from hospitals through prevention and management of chronic diseases.  The key concept here is that they must undergo a stringent government quality benchmarking which includes process, outcome and personal experiences from patients in order to qualify (, 2012; Gold, 2012).


The outcome of the establishment of the ACOs remained to be determined but CMS hoped that it will pave for the return to the collegiality atmosphere that patients are clamoring for.  For patients, it will mean breaking away from the unpleasantness of the 15-minute visit and renewing the essence of coordinated care which is spending “quality time” with their physician and care team.


Cesar Aquino is a Cytotechnologist with an MBA in Healthcare Management and currently a PhD Candidate in Healthcare Administration.