Accountable Care Organization (ACO)
An Accountable Care Organization (ACO) is a group of healthcare providers that voluntarily coordinate care for a defined Medicare population, sharing responsibility for quality outcomes and total cost of care — and sharing in savings when costs fall below a CMS-set benchmark.
What is an ACO?
An Accountable Care Organization (ACO) is a network of physicians, hospitals, and other healthcare providers that agree to coordinate care for a defined patient population. The ACO concept was established by Section 3022 of the Affordable Care Act. The Medicare Shared Savings Program (MSSP) is CMS's primary ACO vehicle, with more than 480 ACOs covering approximately 11 million Medicare beneficiaries as of 2024.
MSSP ACO Tracks
- BASIC Track (Levels A–E): Entry-level tracks with limited downside risk. Level E achieves the same shared savings rate as the ENHANCED track while beginning to accept downside risk.
- ENHANCED Track: Two-sided risk model where ACOs share in savings AND losses. Offers the highest shared savings percentage (75% of net savings). Requires Minimum Savings Rate (MSR) achievement. ACOs in downside risk tracks can participate as Advanced APMs under MACRA.
Benchmark and Shared Savings Calculation
CMS establishes a total cost of care (TCOC) benchmark for each ACO based on historical per-capita expenditures for attributed beneficiaries, trended forward and risk-adjusted. If the ACO's actual TCOC for its attributed population falls below the benchmark while meeting quality performance thresholds, the ACO receives a percentage of the savings as a shared savings payment. The Minimum Savings Rate (MSR) — typically 2–3.9% depending on ACO size — must be exceeded before any sharing begins.
REACH ACO Model
The Realising Equity, Access, and Community Health (REACH) ACO model replaced the Global and Professional Direct Contracting (DC) models in 2023. REACH ACOs take on greater financial risk (full-risk or high-risk options) and receive enhanced capabilities including prospective payments and the ability to expand to Medicaid-Medicare dual-eligible populations. REACH ACOs that qualify as Advanced APMs exempt participating physicians from MIPS reporting.
Quality Reporting for ACOs
MSSP ACOs must report a subset of quality measures across preventive care, chronic disease management, and patient experience domains. Quality performance gates savings distribution — ACOs must achieve a minimum quality score threshold to receive any shared savings payment. The quality measures include: screening for depression and follow-up; colorectal cancer screening; breast cancer screening; blood pressure control; diabetes comprehensive care; and the CG-CAHPS patient experience survey.