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The impact of accountable care: Origins and future of Accountable Care Organizations

S. Lawrence Kocot, Ross White, Tianna Tu, and David Muhlestein

Accountable Care Organizations (ACOs) represent a changing dynamic in the American health care system where providers will increasingly be paid to effectively manage the health of populations rather than based on the volume of services they provide. An ACO is formed when a group of health care providers (physicians, hospitals, non-physician providers, etc.) come together and collectively agree to become responsible for the financial and quality outcomes for a defined population.  The changing payment models shift financial risk from payers (such as insurance companies or employers) toward providers. In doing so, providers are strongly incentivized to change how they are delivering care with the goal of decreasing spending while improving quality measures and patient satisfaction. Accountable care models have been adopted by Medicare, state Medicaid plans, and commercial health insurers. These initiatives have led to an increase in the number of ACOs from fewer than 100 to well over 700 in the past five years. ACOs now exist in all 50 states and provide care for more than 23 million people.

The fragmented and misaligned state of the U.S. health care system has become a catalyst for payment and delivery system reforms. Traditional fee-for-service (FFS) payment structures incentivize high volume rather than high quality care, and lead to the suboptimal provision of medical services across the disjointed provider landscape. Despite various attempts to improve care delivery, health care costs continue to rise. The Accountable Care Organization (ACO) model seeks to reverse these trends by promoting a simultaneous restructure of the payment and delivery systems to incentivize higher quality, lower cost care.

This paper provides an overview of the accountable care movement; describes the structural classification of ACOs and various accountable care payment contracts; and provides a high-level trend analysis of where the ACO movement is heading.

To view the entire accountable care paper series click here.

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