Under the Medicare program, Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers that come together voluntarily to give coordinated high-quality care to their Medicare patients.
The final rule on the Medicare Shared Savings Program (MSSP) for ACOs, issued in October 2011, outlines the types of arrangements ACOs may have with the Centers for Medicare & Medicaid Services (CMS) to be reimbursed for their Medicare patients’ care.

The Three Medicare ACO models:

1. Shared Savings (220 ACOs). Typically, an ACO enters into a three-year contract with CMS after which it will have the option to continue on to a more risk-bearing payment model. The MSSP rule implements both a one-sided risk model (sharing of savings only for the first two years and sharing of savings and losses in the third year) and a two-sided risk model (sharing of savings and losses in all three years). In both models, should the ACO meet predetermined cost and quality targets, it is entitled to split the savings with the government. To date, most of the Medicare ACOs have opted for the one-sided risk model.
2. Pioneer (23 ACOs). A select group of organizations that already had significant experience in coordinating care for patients across care settings. Pioneer ACOs may accept prospective, global payments from CMS in their third year if they are able to demonstrate savings in the first two years. Pioneer ACOs began Jan. 1, 2012, and so may be eligible for global payments beginning Jan 1, 2014.
3. Advanced Payment (35 ACOs). Physician-based and rural providers that wish to become an ACO but lack the necessary staff and infrastructure to adopt the model. They receive upfront and monthly payments, which they can use to make investments in their care coordination infrastructure.
Pioneer ACOs Save Money, Boost Quality
In July, CMS released results from the first performance year of the Pioneer ACO Model. According to the agency, the Pioneer ACOs achieved both “higher-quality care and lower Medicare expenditures.”
Costs for the more than 669,000 beneficiaries in Pioneer ACOs grew by only 0.3 percent in 2012, while costs for similar beneficiaries grew by 0.8 percent in the same period.
In addition, 13 out of 23 pioneer ACOs produced shared savings with CMS, generating a gross savings of $87.6 million in 2012 and saving nearly $33 million to the Medicare Trust Funds, CMS said.
Pioneer ACOs earned more than $76 million, and only two Pioneer ACOs had shared losses, totaling approximately $4.0 million. According to the memo, program savings were driven, in part, by reductions that Pioneer ACOs generated in hospital admissions and readmissions.
All Pioneer ACOs successfully reported quality measures and achieved the maximum reporting rate for the first performance year, with all earning incentive payments for their reporting accomplishments, the CMS memo said.
Overall, Pioneer ACOs performed better than published rates in fee-for-service Medicare for all 15 clinical quality measures for which comparable data are available. (Seven measures had no comparable data in the published literature.)
Twenty-five of 32 (there are now 23 Pioneer ACOs) Pioneer ACOs generated lower risk-adjusted readmission rates for their aligned beneficiaries than the benchmark rate for all Medicare fee-for-service beneficiaries.
In addition, Pioneer ACOs were rated higher by ACO beneficiaries on all four patient experience measures relative to the 2011 Medicare fee-for-service results.
Overall, more than 240 organizations participate in the Pioneer ACO Model and the Medicare Shared Savings Program, serving 4 million Medicare beneficiaries.

Private-Sector ACOs

ACOS that exist outside of Medicare are referred to as private-sector ACOs, which are integrated networks of providers that have negotiated some kind of risk-bearing, value-based payment contract with one or more private-sector payers.
ACOs in the private sector are more difficult to track, because there is no specific approval or requirement for a provider network to deem itself an ACO.
Industry experts estimate that there are approximately 200 ACOs operating in the private sector.

Medicaid ACOs

The National Academy of State Health Policy (NASHP), which tracks state-level accountable care activities in the Medicaid and Children’s Health Insurance Program populations, finds that 16 states are experimenting with accountable care arrangements.
While efforts to test Medicaid accountable care models vary considerably from state to state, NASHP has identified core characteristics and capabilities that must be consistent across all designs to be considered anACO.
For more information on characteristics of Medicaid ACOs and the seven domains identified, visit: http://nashp.org/state-accountable-care-activity-map.
Source: The Centers for Medicare & Medicaid Services, July 2013, and the American Health Care Association