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An important feature of the health reform legislation passed in March 2010 is a provision that enables Medicare to reward health care organizations that meet quality-of-care and cost-reduction goals with a share of the savings that result. To participate in the program, health care providers must organize themselves into accountable care organizations (ACOs)—a term used to describe entities that take responsibility for the quality, outcomes, and cost of care delivered to a population of patients across institutional settings.1
Different organizational structures can be leveraged to create accountable care organizations, but the ACO model is intended to encourage participating primary care physicians, specialists, and hospitals to work together (and potentially with long-term care providers) to ensure the care they deliver is well coordinated and designed to benefit patients and reduce waste. Because the savings to be shared are achieved by eliminating unnecessary expenses and improving quality, the model focuses providers’ attention on areas of health care delivery that are fragmented, inefficient, and inconvenient for patients. Many physician groups and integrated delivery systems are evolving into ACOs independent of Medicare. In partnership with private insurers, they focus on preventing chronic disease, improving transitions between caregivers, and avoiding preventable hospital readmissions—interventions that offer little financial benefit for providers under the current fee-for-service system.