Accountable Care
Organizations (ACOs)
ACOs create incentives for healthcare providers to work together to treat an individual
patient across care settings—including doctor ofces, hospitals, and long-term care
Both the 2010 Patient Protection and Affordable Care Act and economic realities are
compelling hospitals and physicians to rethink how they deliver care. The current
system, which generally rewards physicians and hospitals for “doing more,” is no
longer sustainable. New models and payment methods are being sought that reward
providers on the basis of quality and cost effectiveness rather than volume.
Principal in buzzwords among these models are Accountable Care Organizations
(ACOs). The Medicare Shared Savings Program and participating private payers will
reward ACOs that lower growth in healthcare costs while meeting performance stan-
dards on quality of care.
Participation in ACOs is voluntary, and not all health facilities or physicians may
be willing or able to adopt this model. To be an ACO, however, one does not simply
declare it. The term is one that is used for a specic purpose, and an entity is not an
ACO unless the Centers for Medicare & Medicaid Services (CMS) declares that it is.
Otherwise, it really should be selecting another name and acronym.
In a press release dated December 19, 2011
, the U.S. Department of Health and
Human Services (HHS) Secretary Kathleen Sebelius announced that thirty-two
leading healthcare organizations from across the country will participate in a new
Pioneer Accountable Care Organizations initiative made possible by the Affordable
Care Act. The Pioneer ACO initiative will encourage primary care doctors, spe-
cialists, hospitals, and other caregivers to provide better, more coordinated care for
people with Medicare and could save up to $1.1 billion over ve years. Under this
initiative, operated by the CMS Innovation Center, Medicare plans to reward groups
of healthcare providers that have formed ACOs based on how well they are able to
both improve the health of their Medicare patients and lower their healthcare costs.
Secretary Sebelius stated that she was excited that so many innovative systems
elected to participate in the initiative, and she explained that there are many other
ways that healthcare providers can get involved and help improve care for patients.
The Pioneer ACO initiative was just one of a menu of options for providers looking
to better coordinate care for patients and use healthcare dollars more wisely. The
Pioneer ACO model is designed specically for groups of providers with experience

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