An Accountable Care Organization, or ACO, is a group of health care providers – including primary care physicians, specialists, and hospitals – that works together to coordinate patient care and accept collective accountability for the cost and quality of care delivered to a population of patients.
The Affordable Care Act includes a provision that allows health plans that partner with providers, as part of an ACO, to reward those providers with a share of the savings that results from improving care quality and reducing costs for their patient populations. The Centers for Medicare & Medicaid Services (CMS) are currently testing several ACO programs, and private commercial payers are also supporting ACO formation.
ACOs are not health maintenance organizations (HMOs), which generally refer to fully-integrated delivery systems where the insurer, physician groups, and hospitals are part of one organization and care is provided to only those who are insured by that organization. HMOs also refer to the common private health plan product that is essentially a payment contract with a specific network of physicians and hospitals.
In contrast, an ACO can include independent providers, as well as providers from multiple organizations, and the insurer is typically a partner, rather than a part of the organization.