6 Things Your Medical Practice Needs to Know About ACOs

June 30, 2020 by Antonio Arias, MBA, CHBME

Topics: Practice Management


As a medical billing company, we are always monitoring how the healthcare industry is evolving. One clear trend we’ve been watching in recent years is the way value-based care has become increasingly important to the governmental powers that be. If delivering enhanced, collaborative care to your patients is a growing priority for your practice, you may be intrigued by the opportunity to participate in one of the most successful initiatives in the value-based care movement: the Accountable Care Organization (ACO).

What is an ACO?

Over the last few years, ACOs have become a common feature of the US healthcare landscape. The Centers for Medicare & Medicaid Services (CMS) defines ACOs as groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated, high-quality care to their patients. The goal of this approach is to ensure that patients, especially the chronically ill, get the right care at the right time without enduring medical errors or duplicative treatments, visits, and services.

The Affordable Care Act encourages providers to form ACO healthcare networks in order to become eligible for bonuses for delivering care more efficiently. Most ACO discussions center around Medicare, which offers a program in which providers make more money if they keep their patients healthy.

Under government initiatives such as the Medicare Shared Savings Program, ACO healthcare participants that meet various quality and cost-savings objectives can share in the cost savings achieved overall – making it the first care delivery model that allows physicians to see tangible financial benefits from providing well-coordinated care to their patients.

As of mid-2019, Leavitt Partners had identified 995 active ACOs with service in all 50 states and the District of Columbia, which means no matter your geographic location, joining an ACO is an option available to your practice. There are more than 1,500 public and private ACO contracts in place, providing coverage to almost 44 million people.

How Does an ACO Work?

So how exactly are practices incentivized in the ACO model? Members work together to lower the costs of care while simultaneously meeting designated care quality standards. They are then rewarded by being allowed to pocket a portion of those savings. If they don’t meet performance and savings benchmarks, however, they can be stuck paying penalties.

An ACO can be structured in many different ways and can include a variety of different stakeholders – ranging from hospitals to insurers to private companies – as long as it includes primary care physicians. Within an ACO, the entity that spurred the creation of the network typically oversees the group as a whole.

The major key to the ACO healthcare model is instilling a sense of shared responsibility for the cost and quality of care among the entire network. As such, manners of payment are typically non-traditional, though they can take any variety of forms. Some ACOs operate by delivering members equal shares of overall revenue, while others pay by salary, capitation, or productivity-based compensation.

But there’s a lot more to ACO participation than just the potential benefit. As such, physicians are wise to consider a few important factors before signing their practices up as ACO participants.

6 Things Your Medical Practice Needs to Know About ACOs

1. It Can Be a Risk-Reward Scenario

Under many programs, providers also share in the losses when their group fails to meet measured ACO requirements. In the Medicare program, participants can select whether to get involved via a one-sided risk model (sharing in 50 percent of cost savings realized when caring for Medicare patients) or a two-sided risk model (sharing in 60 percent of cost savings and/or losses). Before making your practice vulnerable to a financial hit via the two-sided approach, consider whether or not your bottom line can withstand the impact.

2. Your Payment Model Will Partly Change

With their focus more on shared savings and global fees, joining an ACO is akin to moving one step away from the fee-for-service model, so practices should prepare to adjust their approach to medical billing. But it’s also akin to planning for the future. The entire US healthcare system is increasingly moving away from patient-volume to patient-value, so an ACO can make for a great training ground.

3. You Won’t Practice in a Vacuum Anymore 

Coordinated care under the ACO requirements force practices to enter into new partnerships, and that can be uncomfortable for some physicians. For example, doctors are essentially incentivized to share referrals within the organization, which can feel like abandoning other relationships with a provider’s commonly referred colleagues. Be sure to carefully evaluate the partners you plant your flag with as they’ll be crucial to your success or failure with the ACO at large.

4. Timing (and Location) is Everything 

There’s a flip-side to the referral situation, as well: if tons of other practices in your area partner up with an ACO but you choose not to, you could be cut out of that ACOs referral network and ultimately lose a portion of your patient base. Be careful how long you hold out, however, because you could get left hanging (and face bad business consequences). Furthermore, if you’re in a rural area or small town, you’ll need to look well beyond your community’s borders for potential ACO partners. An ACO has to manage the health care needs of a minimum of 5,000 Medicare beneficiaries for at least three years.

5. Governance Matters 

The leadership and governance of your ACO will dictate the structure of the organization as well as how resources, and patients, are allocated among participating practices. Make sure you’re comfortable with the people and program management and be certain to carve out a means to have your voice heard in organization-wide discussions. 

6. Be Prepared to Sell

Many large hospitals are buying physician practices to form their own ACOs. If you’re approached to sell, get all of the necessary information and make sure that collaborative, value-based care is truly a priority for the organization interested in acquiring you. That means watch out for signs that the entity is just looking to expand its referral base for specialty and hospital services.

The ACO Model is Still Evolving

Since the ACO program first launched, CMS has been experimenting with different models to expand what ACO members can do – for example, having lower or no co-pays for highly important patient visits or serving up to 10,000 patients under one ACO. As of January 2020, there are 41 ACOs participating in the “Next Generation ACO Model,” which is building upon experiences gained from the Pioneer ACO Model and the Medicare Shared Saving Program. 

Stay in the Know with NCG Medical

As an experienced medical billing provider, the team at NCG Medical is continually monitoring the latest changes to the ACO model to help us give you the best advice as it relates to your healthcare practice’s revenue potential. Whether or not you make the decision to participate in an ACO, our billing and coding experts can still work closely with your office to streamline your health insurance reimbursement claims and accelerate your revenue cycle management. To learn more about our medical billing services and how they can help your practice put more focus on your patients, contact our team today.


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