Accountable Care Organizations (ACOs)

President Obama recently published an article in the Journal of the American Medical Association, JAMA, discussing his signature legislative achievement, the Affordable Care Act (ACA). The President considers ACA’s comprehensive reforms to be the most important healthcare legislation enacted in the United States since the creation of Medicare and Medicaid in 1965.

As he prepares to leave office, the President reviews the factors influencing his decision to pursue health reform, summarizes data on the law’s impacts, recommends further action to improve the healthcare system, and discusses public policy lessons learned.

The President credits the ACA as having helped to improve the US healthcare system. He points out that the uninsured rate has declined by 43%, from 16.0% in 2010 to 9.1% in 2015. He also credits the law for improved access to care, providing financial security through reduction in debts sent to collection, and better population health. The President also points to benefits from trends in provider compensation, noting that an estimated 30% of traditional Medicare payments now flow through alternative payment models.

Noting this progress, the President suggests ways that remain to further improve the healthcare system. He recommends continuing to implement the programs and policies in the law, such as the health insurance marketplaces, delivery system reform, and providing and increasing federal financial assistance for marketplace enrollees.

While prescription drug cost reform was not a focus of the ACA, the President believes that cost increases must be addressed. He recommends that Congress require more transparency around manufacturers’ actual production and development costs, increase rebates manufacturers are required to pay for drugs prescribed to certain Medicare and Medicaid beneficiaries, and give the federal government the authority to negotiate prices for certain high-priced drugs.

Significantly, President Obama also suggests introducing a public plan option in areas that lack competition in the individual insurance market. The public option was considered but not included in the ACA in favor of Consumer Operated and Oriented Plans, or CO-OPs. As we have addressed in this Blog, the CO-OP program has been unsuccessful in many of the states where CO-OPs were established. However, the President believes that costs could be better controlled by public plans operating alongside private insurers in areas of the country where competition is limited.

While recognizing that the law can be improved and supporting efforts to do so, President Obama notes much time has been absorbed by the more than 60 attempts to repeal parts of all of the ACA. Hyperpartisanship and the financial power of special interests are viewed as obstacles to progress. However, he concludes with an optimistic assessment that the ACA demonstrates that positive change addressing complex challenges is achievable.

President Obama’s article can be read in its entirety at the following link:


While the Centers for Medicare and Medicaid Services is touting the success of tying 30 percent of fee-for-service Medicare payments to alternative payment models, such as accountable care organizations and bundled payments, questions still remain over how much money value-based programs will save. In 2014, CMS said the 20 ACOs in its Pioneer program and the 333 in the Medicare Shared Savings Program, saved a total of $411 million. However, after paying bonuses to the strong performers, the ACO program reported a net loss of $2.6 million, according to Kaiser Health News.

We were interviewed for a story about Medicare ACO program savings. We stated that ACOs have other benefits aside from cost-savings by which the programs should be assessed. Deborah was quoted: “There is the true intent and hope that by providing comprehensive care and sharing a risk, the quality is improved.  It’s not just monetary; that can be very exciting to providers.”

To read the full article, click here.

In light of the Affordable Care Act, accountable care organizations (ACOs) have become a tool for the Centers of Medicare and Medicaid as a way to streamline spending to reduce the overall costs of healthcare. Increasingly, ACOs run by private insurers are becoming more attractive to health systems that are looking to reap the same benefits as the government by using the model to create more efficiencies in the delivery of healthcare.

We recently discussed the rise in popularity of private ACOs for an article published on March 14 in Healthcare Finance News, a leading industry news source for healthcare finance executives. The article, which is titled “Private Accountable Care Organizations Take Off; What to Know About These Value-Based Models,” delves into the terms of ACO arrangements that healthcare providers should consider prior to joining.

To read the full article, click here.