Key Takeaways

  • Accountable Care Organizations (ACOs) can have help evidence-based programs improve patient experiences and quality outcomes and also reduce health care costs.

  • Evidence-based programs can help ACOs improve the health of their assigned beneficiaries with complex care needs, who are disproportionately affected by chronic diseases.

Community-based organizations can find powerful partners in accountable care organizations (ACO) to improve patient experiences, increase quality outcomes, and lower costs.

What is an accountable care organization (ACO)?

As defined by the  Centers for Medicare and Medicaid Services, an ACO is, "an organization of health care practitioners that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service (FFS) program who are assigned to the ACO." 

The Affordable Care Act introduced new opportunities for innovation in the Medicare fee-for-service program—Medicare Shared Savings Program (MSSP). ACOs are an MSSP model focused on providing the right care, at the right time, in the right setting. ACOs work to improve chronic disease management, ensure smooth transitions from hospitals to homes, and promote preventive care that supports improved health outcomes. The model builds on the Medicare Physician Group Practice Demonstration and the Medicare Health Care Quality Demonstration.

ACO practitioners may be a combination of individual or group practice providers, hospitals and/or specialty providers who voluntarily collaborate to provide enhanced care and coordination to targeted members of their patient population. ACOs support provider-led organizations’ participation in risk-based health care models. Physicians and other health care providers form a care coordination infrastructure to manage quality of care, health outcomes, and impact the total cost of care. The ACO model empowers health care providers to better coordinate and improve the quality of care they deliver to their ACO patients.

ACOs by the numbers

573,000 participating practitioners, 1,300 hospitals
11 million Medicare beneficiaries (1/3 of all Medicare beneficiaries)
$1.6B in savings to Medicare program ($13.3B in savings since 2012)1,2

Medicare and accountable care organizations

While there are Medicare and commercial ACOs, and Medicare ACOs are the most prominent. 

When a Medicare ACO achieves delivery of high-quality care and controls health care spending, it may qualify to share in the savings it achieves for the Medicare program. ACOs are but one of many options CMS has exercised to promote Value Based Payment. Based on the ACO’s success and demonstrated potential to continually improve value for Medicare beneficiaries and the health care system, CMS has set a goal to see more than 50% of Medicare beneficiaries be part of an accountable care relationship by 2030.

Coordinating patient care in an ACO

Participating practitioners work together to improve quality, streamline processes, reduce duplication, and control costs in the ACO. All ACO practitioners share in the financial savings and may be liable for potential risks. The ACO Medicare contracts are measured over a three-year program period.

The ACOs accept responsibility for the overall quality, cost, and care for their assigned beneficiaries. ACOs must have a minimum of 5,000 beneficiaries. Beneficiaries are assigned to ACOs and retain access to providers of choice; they may decline/opt out of the ACO at any time. Primary care providers participating in ACOs must post information about ACO participation in their offices and provide notice to enrollees designated for ACO participation. Providers coordinate care and referrals across a continuum of clinical and social care services.

The ACO infrastructures must include:

  • Establishment of appropriate legal and governance structures
  • Defined processes to promote evidence-based medicine and patient engagement
  • Monitoring and evaluation of quality and cost measures
  • Demonstrate patient-centered criteria and coordination of care across the health/social services continuum
  • An adequate provider network

An ACO entity may be comprised of a variety of health care practitioners, including:

  • Doctor of Medicine (MD)
  • Doctor of Osteopathic Medicine (DO)
  • Physician Assistants (PA)
  • Nurse Practitioners (NP)
  • Networks of individual practices
  • Partnerships or joint venture arrangements between hospitals and ACO practitioners
  • Hospitals employing ACO practitioners
  • Community clinics
  • Federally Qualified Health Centers (FQHC)
  • Other Health and Human Services (HHS) approved providers

ACO shared savings arrangements

  • Track 1—These ACOs assume no downside financial risk, meaning there’s no financial penalty (upside risk) to the ACO if it doesn’t lower costs. It can only benefit from the shared savings that are generated. Track 1 is often viewed as a stepping stone to help the ACO ‘test the waters’ and initiate best practices and integration necessary to achieve and sustain lower costs.
  • Track 2—These ACOs must repay Medicare for exceeding anticipated costs (downside risk). However, when shared savings are generated, they receive a larger portion of those savings as compared to Track 1 designees.
  • Track 3—These ACOs have the greatest amount of downside risk but may also share in the greatest portion of savings if successful.

Currently, the one-sided risk option (Track 1) is the most popular, with 82% of ACOs falling into this category. Track 2 includes 1-2% of the ACOs, and the remaining percent are in Track 3. New ACOs often begin in Track 1. The goal is to gain experience in managing the program, beneficiary care, and costs, in order to transition to Track 3, where greater shared savings are achieved. Having options makes it easier for organizations with varied levels of experience, including small physician practices, to organize and operate an ACO.

ACO quality

Meeting the CMS-established ACO quality standards requires an ongoing commitment to patient-centered care with a focus on proactive health maintenance. To be eligible for any shared savings that are generated, ACOs must meet the established quality performance standards. Some key measures include:

  • Clinical
    • Assessment of diabetes management (hemoglobin levels)
    • Unplanned admissions for patients with chronic illnesses
    • Controlling hypertension
    • Screening for future falls risks
  • Consumer Satisfaction and Experience
    • Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey

The MSSP quality measures include four domains:

  • Patient/caregiver experience
  • Care coordination/patient safety
  • Preventive health
  • At-risk population

ACO evolution

In the 2023 Physician Fee Schedule proposed rule, CMS proposed changes to the Medicare Shared Savings Program that would promote more ACO participation among health care providers. CMS is proposing to incorporate advance payments to certain new ACOs in rural and underserved communities that could be used to address social needs This policy change would represent a milestone in Medicare FFS payments and would allow for more payment of health-related social needs (HRSNs) for ACO-affiliated beneficiaries. CMS is also aiming to support smaller ACOs by giving them more time to transition to downside risk. A health equity adjustment to an ACO’s quality performance score that would reward excellent care delivered to underserved communities is also under consideration. In addition, CMS is proposing benchmark adjustments to encourage more ACOs to join the program and to maintain participation amongst current ACOs. CMS is laser focused on providing more access to care and broader support for FFS beneficiaries via ACO model reform.

In January 2023, CMS launched The ACO REACH Model (Realizing Equity, Access and Community Health). This new model is designed to promote health equity and targets underserved communities for the benefits of accountable care model coordination. REACH ACO models also promote more person-centric support and patient engagement.

REACH ACOs must develop and implement a robust health equity plan and identify a plan for serving underserved communities and implement initiatives to measurably reduce health disparities within their beneficiary populations. Participating providers must hold at least 75% of governing board voting rights. REACH ACOs must also include at least two beneficiary advocates on the governing board with full voting rights (at least one Medicare beneficiary and at least one consumer advocate).

Promoting evidence-based programs

Self-management practices can mitigate the progression of chronic illnesses and thereby reduce the financial burden on the health care system. Evidence-based chronic disease self-management programs (CDSME) programs show great promise in supporting ACOs efforts to reduce acute care utilization and long-term services and supports (LTSS) expenditures while improving quality of care and health outcomes. Developing partnerships between community-based organizations (CBOs) that are delivering CDSME programs and ACOs can be mutually beneficial.

Evidence-based CDSME programs have been shown to activate patients so that they are more involved in their health, have increased self-efficacy, practice healthy lifestyle behaviors more often, and report feeling better. The programs have been demonstrated to improve a number of quality measures related to health status, health care, and costs.

Because CDSME programs are peer-led, provide a supportive environment to facilitate change, and empower participants to take charge of their health, they are well-suited for helping to improve the health status of older adults and people with disabilities. These programs can be useful in helping ACOs improve the health of their assigned beneficiaries with complex care needs, who are disproportionately affected by chronic diseases.

Find ACOs in your state.

This project was supported, in part by grant number 90CSSG0048 and 90FPSG0051 from the U.S. Administration for Community Living, Department of Health and Human Services, Washington, D.C. 20201. Grantees undertaking projects under government sponsorship are encouraged to express freely their findings and conclusions. Points of view or opinions do not, therefore, necessarily represent official Administration for Community Living policy.​


1. Centers for Medicare and Medicaid Services. Medicare Shared Savings Program Saves Medicare More Than $1.8 Billion in 2022 and Continues to Deliver High-quality Care. Aug. 24, 2023. Found on the internet at

2. National Association of ACOs. Highlights of the Medicare ACO Program Results. Found on the internet at