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ACOs in Healthcare Administration Essay

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Updated: Jun 18th, 2022

ACOs are health care providers who team up to provide coordinated care through Medicare, Medicaid, and contracts with other insurance partners. As part of the Medicare and Medicaid program, the main goal of coordinated care is to optimize services by reducing duplication of services and improving care timeliness. If the savings are successful, ACOs can be reimbursed by Medicare, which keeps the ACO interested in optimizing the healthcare system. Patients who have Medicare can receive ACO services if their doctor is involved in the ACO and has sent them a written invitation. In such a case, ACO is responsible for the quality of patient care and medical costs. Consequently, ACO bears equal responsibility with other service providers and is a motivated party, which creates good prospects for further functioning in the US.

Kaufman et al. (2019) note that more than 900 ACOs have entered into payment contracts with public and private insurers since 2010. According to the study, the most common positive outcomes of public and private ACOs were reduced inpatient services, fewer emergency department visits, and improved prevention and management of chronic diseases (Kaufman et al., 2019). On the one hand, this indicates the successful functioning of the ACO. But there are also alarming indicators that have led scientists to believe that attention should be paid to the impact of ACO on patient care and healthcare outcomes.

In 2018, Medicare and Medicaid (CMS) worked hard to link at least 50% of reimbursement to alternative payment models (Nathan et al., 2019). One of the payment experiments’ main objectives was to invite providers to accept responsibility for the total cost of treatment, including hospitalization and other expenses. In this way, the CMS set out to create closer relationships with the ACO system participants, but it is not known how successful their intentions were. ACOs have spread rapidly, reaching over 32 million Americans and achieved some success in reducing overall health care costs (Nathan et al., 2019). Initially, ACOs were selected based on their ability to ensure more doctors’ participation and the duration of the ACO’s existence.

Currently, the ACO model is incorporated into national health care reform legislation as a demonstration program run by Medicare and Medicaid. There are several types of Medicare ACO programs, including Medicare’s General Savings Program, which aims to improve public health and reduce spending, and the ACO Investment Model, which tests prepayment approaches to support the ACO’s MSSP. There is also the Next Generation ACO Model, allowing providers to take more financial risk, the Vermont ACO All-Payer model, and the Medicare-Medicaid ACO model. Some academics have criticized the ACO for its lower levels of coordination and management and the lower quality of Medicare delivery (Lewis et al., 2017). Scholars also noted that motives for partnerships typically included complementarity of resources, risk mitigation, and legal requirements.

Thus, ACO is a widely recognized and well-functioning health care delivery system. However, due to the uneven distribution of responsibility for the quality of care, cost levels, and health outcomes between ACO and Medicare or other partners, ACO may lack external oversight. It can have serious consequences, including a decrease in the quality of treatment and a lack of optimization of the level of costs, from which the final consumers of the service – patients – will suffer. Therefore, despite the sensible and forward-looking idea behind creating the ACO, this initiative requires further supervision and monitoring by the government, Medicare, and Medicaid.


Kaufman, B. G., Spivack, B. S., Stearns, S. C., Song, P. H., & O’Brien, E. C. (2019). Impact of accountable care organizations on utilization, care, and outcomes: a systematic review. Medical Care Research and Review, 76(3), 255-290.

Lewis, V. A., Tierney, K. I., Colla, C. H., & Shortell, S. M. (2017). The new frontier of strategic alliances in health care: New partnerships under accountable care organizations. Social Science & Medicine, 190, 1-10.

Nathan, H., Thumma, J. R., Ryan, A. M., & Dimick, J. B. (2019). Early impact of Medicare accountable care organizations on inpatient surgical spending. Annals of Surgery, 269(2), 191.

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