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Kwasi Oppong-Manu
Professor Doug Campbell/Professor Stephen Jones
Principles of Health Administration
27 October 2014
Accountable Care Organizations and the U.S. Healthcare System
An accountable care organization (ACO) is a model for healthcare organization included
as a supplement to the 2010 Patient Protection and Affordable Care Act (ACA). The ACA was
established with the various objectives of furthering the quality and affordability of health
insurance, lowering the uninsured rate by expanding public and private insurance coverage, and
diminishing the costs of healthcare for both individuals and the government. According to the
Centers for Medicare and Medicaid Services (CMS), an ACO is “an organization of health care
providers that agrees to be accountable for the quality, cost, and overall care of Medicare
beneficiaries…” (CMS). In the ACA’s efforts to reduce the overall costs of healthcare while still
providing efficient healthcare services, the implementation of accountable care organizations
provides a means for a payment and care delivery system that attempts to link provider
reimbursements to healthcare quality and reductions in the total cost of care for a specified group
of patients. A group of coordinated health care providers forms an ACO, which then provides
care to a certain group of patients through a range of payment models, including capitation or
fee-for-service.
Although, accountable care organizations were created with considerable flexibility in
mind, there are still defining core principles that all ACO’s must adhere to. A selection in the

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online health policy journal Health Affairs, written by McClellan et. al presents the three main
aspects that every accountable care organization:
(1) Provider-led organizations with a strong base of primary care that are collectively
accountable for quality and total per capita costs across the full continuum of care for a
population of patients.
(2) Payments linked to quality improvements that also reduce overall costs.
(3) Reliable and progressively more sophisticated performance measurement, to support
improvement and provide confidence that savings are achieved through improvements in
care. (McClellan et. al)
Based on the flexibility of this all-inclusive definition, a vast majority of provider organizations
– including existing integrated delivery systems or other organized care facilities involving
hospitals, physicians, and long-term care and other providers – could be considered accountable
care organizations. However, all of the aforementioned healthcare providers must still be
compliant within the confines of three core attributes of accountable care organizations to
actually be considered one. Additionally, this definition of ACOs describes a transparency
between healthcare providers and patients through particular cost and quality performance
evaluations. There would be payment incentives in accordance with attaining better service and
lower costs for defined populations of patients.
With the introduction of accountable care organizations, the term and description of the
model drew comparisons to the Health Maintenance Organization (HMO), which rose to
prominence in the 1970s. Both ACOs and HMOs rely heavily on the development of physician
networks, promotion of member health and resource management to control costs. However, as
explained by the article “How Do Today’s ACOs Differ From ‘90s Managed Care?” written by

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Mary K. Caffrey in the American Journal of Managed Care, “unlike the health maintenance
organization…the ACO measures quality of care and patient satisfaction alongside savings – the
so-called ‘Triple Aim’”. By evaluating quality of care, patient approval, and cost reductions,
ACOs have a significant, expansive role within the U.S. healthcare system and accomplish much
more than HMOs did. Moreover, in comparison to accountable care organizations, HMOs were
formed to aggregate risk without completely understanding how to handle that risk. Currently,
ACOs within the healthcare system seeks to reward those services that take on difficult cases and
improve the health of these patients.
In terms of reducing costs for healthcare services, accountable care organizations place a
degree of financial burden on providers in an attempt to improve care management and limiting
unnecessary expenditures. At the same time, ACOs strive to provide patients the flexibility to
select their medical services at will. According to “A National Strategy to Put Accountable Care
into Practice”, an article in Health Affairs, the success of the ACO model in encouraging medical
quality while simultaneously regulating costs is dependent on its ability to "incentivize hospitals,
physicians, post-acute care facilities, and other providers involved to form linkages and facilitate
coordination of care delivery” (McClellan et al.). By improving healthcare management,
accountable care organizations can assist with the reduction of unnecessary medical care and, in
turn, advance health outcomes. Eventually this betterment of health outcomes will lead to a
lessening in utilization of acute care services, ultimately leading to an estimated median savings
of $470 million within the next few years, according to Centers for Medicare and Medicaid
Services (CMS).
In terms of ensuring continuous quality within the healthcare delivery system, the CMS
has established five benchmarks that accountable care organizations must meet to evaluate the

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quality of the ACO’s performance and to gauge the progression of improving healthcare
services. The five domains are "patient/caregiver experience, care coordination, patient safety,
preventative health, and at-risk population/frail elderly health (CMS).
There are certain stakeholders in accountable care organizations and one major
stakeholder is the provider. ACOs encompass vast networks of providers, particularly hospitals,
physicians, and other healthcare professionals. Providers may also include health departments,
social security departments, safety net clinics, and home care services, however, the inclusion of
these facilities in an ACO is dependent on its level of integration and size. The various providers
within an accountable care organization must cooperate effectively with each other to provide
efficient and coordinated care to the specific population that receives the health benefits, align
incentives and decrease overall healthcare expenses. Despite the comparisons to health
maintenance organizations, accountable care organizations are different in that they permit
providers the autonomy to develop their specific ACO arrangement. For instance, due to the
flexibility in regards to ACO management within the Affordable Care Act, any capable provider
may assume the leadership role of running an ACO.
The federal government, in the form of Medicare, will be the primary payer of an
ACO.[35] Other payers include private insurances, or employer-purchased insurance. Payers may
play several roles in helping ACOs achieve higher quality care and lower expenditures. Payers
may collaborate with one another to align incentives for ACOs and create financial incentives for
providers to improve healthcare quality.
An ACO’s patient population will primarily consist of Medicare beneficiaries. In larger
and more integrated ACOs, the patient population may also include those who are homeless and

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uninsured. Patients may play a role in the healthcare they receive from their ACOs by
participating in their ACO’s decision-making processes.