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ACO Series: Part 1

Accountable Care Organization 101: What is an ACO?

An Accountable Care Organization (ACO) is an optional Medicare reimbursement program. In the ACO model, doctors and/or hospitals band together and provide care to at least 5,000 Medicare patients. Then, the ACO agrees to provide quality care and achieve Medicare’s goals for 23 quality measures. During the year, each doctor gets paid fee-for-service as normal.  Finally, at the end of the year, the ACO receives a bonus of up to half of the savings.

In the Medicare Shared Savings Program (MSSP) the incentive is dependent on a simple arrangement: the providers take part in an Account Care Organization with the overarching goal of lowering the cost of quality care for beneficiaries. For any savings, paired with attained quality metrics, the providers receive a bonus payment. Per CMS, the Shared Savings Program is committed to achieving better health for individuals, better population health, and lowering growth in expenditures.”

An Example

For example, let’s say an ACO has 10,000 patients. CMS actuarial research says each beneficiary in your region normally costs the Medicare program $12,000 per year. With 10,000 patients at $12,000 per year, Medicare expects to pay $120,000,000 for their care. Say you save just $1000 per beneficiary by keeping them healthy and out of the hospital. 10,000 patients at $11,000 per year equals a total cost of $110,000,000. You have just saved the Medicare program $10,000,000.

Assuming you have provided quality care, your ACO will share in up to 50 percent of the $10,000,000 in savings. That leaves $5M in bonuses back to your organization (to divvy up as you see fit).  The Medicare Shared Savings Program is not a slam-dunk, but there are partners that can help put it all together.

Be sure to keep up with this 5-part series as we explore other FAQs about Accountable Care Organizations! Up Next: ACOs for Primary Care Physicians

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