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Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries?

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Document date: October 01, 2009
Released online: November 05, 2009

The text below is an excerpt from the complete document. Read the full brief in PDF format.


Experts agree that the way health care is currently paid for in the United States, especially in the traditional, fee-for-service Medicare program, does not support coordinated care that is high quality and cost-efficient. To address these problems, policy-makers are taking a close look at accountable care organizations (ACOs).

This policy brief explores what ACO are, how they compare to previous reform concepts such as Health Maintenance Organizations and Provider Sponsored Organizations, key design and implementation issues, and opportunities and challenges.

The authors conclude that ACOs are no real game changers in the short term, but are nevertheless important to try.


In the current health reform discussions, accountable care organizations (ACOs) have been proposed as a novel way to slow rising health care costs and to improve quality in the traditional Medicare program and perhaps other public and private insurance programs. However, for many, it is not clear what ACOs are and whether and how they differ from other past reform approaches intended to achieve the same goals. The ACO concept is confusing partly because it is a concept with a history, one that is rapidly evolving and for which the terminology seems to keep changing. In fact, as the Issue Brief will show, different reform ideas have now been joined under the rubric of ACO.

The primary purposes of this Issue Brief are to provide insight into what ACOs seem to represent and whether they potentially offer a new and improved way to reform U.S. provider payment and delivery systems, with an emphasis on their application in Medicare. First, we clarify what ACOs generally are, including the current concept’s genesis and important dimensions on which ACOs might vary. Second, we discuss what is new about the current ACO concept compared to previous reform concepts, such as “accountable health plans” or Health Maintenance Organizations (HMOs) and provider-sponsored organizations (PSOs) that were established for Medicare in the Balanced Budget Amendment (BBA)
of 1997.

Third, we identify key ACO program features and issues policymakers are grappling with and about which there are different and even divergent viewpoints. These include: (1) the ACO definition and qualifying criteria, such as what kinds of providers must be included and whether an ACO is different from a patient-centered medical home (PCMH); (2) whether an ACO program should be voluntary or mandatory for providers; (3) similarly, whether beneficiaries should be assigned to ACOs or should elect to participate in one; (4) alternative ACO payment methods and their respective strengths and weaknesses; and, (5) quality measurement and monitoring. Decisions about these program features and issues will strongly influence providers and patients’ reactions to the ACO concept.

Finally, we discuss several major implementation challenges, specifically, participation of and possible untoward impact on other payers and the new roles, responsibilities, and capabilities for providers and government. We also summarize some of the pointed skepticism that some have leveled at the ACO concept and consider whether this is another example of a concept advanced more by wishful thinking than by empirically based policy analysis.

We conclude that ACOs are no game changer in the short run because they require resolution of some challenging and complex issues as well as significant provider and policymaker learning, but nonetheless, they are important to try. If done well, an ACO program could build on lessons learned from and since the managed care era of the 1990s, get critical provider payments and delivery system changes underway, and perhaps in the long run move us beyond reliance on what many consider a dysfunctional fee-for-service (FFS) payment system.

(End of excerpt. The entire brief is available in PDF format.)

Topics/Tags: | Health/Healthcare

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