Accountable Care Organizations

What to know about Accountable Care Organizations You’ve probably heard a lot of talk about ACO’s in recent years. But what exactly is an ACO? And how do you know if it’s a solution that could benefit your organization?

HMO? ACA? ACO? It can be difficult to keep track of all the acronyms used in health care. If you’re struggling to keep up with what they all mean – you’re in luck. Because today I’m going to answer your questions about one acronym that has been a hot topic of conversation among employers recently: Accountable Care Organizations.

What are Accountable Care Organizations (ACOs)?

ACO stands for Accountable Care Organization. An Accountable Care Organization is a network of doctors and hospitals that work together to provide coordinated care to patients in an effort to lower costs and improve health outcomes. These doctors and hospitals share not only medical responsibility but also the financial risk as part of the ACO. The patients that are part of an ACO generally go to those doctors and hospitals to get care. Care outside of an ACO is typically covered at out-of-network benefits or requires a referral from the ACO to be paid at in-network benefits.

The structure of an ACO has been around for quite some time, but the term ACO is fairly new. As part of the ACA (yes, I know…another acronym. This one means the Affordable Care Act), the Centers for Medicare & Medicaid Services (CMS) coined the term Accountable Care Organization. 

What is the difference between an ACO and a narrow network?

These can seem very similar considering they both limit the places a patient can go for care to get costs covered under your benefit plan. In Accountable Care Organizations, providers share financial risk with the health plan, aligning incentives to provide cost-effective care.

What are the benefits of an ACO?

Although the process to switch to an ACO from a broader network can be disruptive, it can also save money and improve care quality over time. The ACO providers and health plan are sharing accountability to achieve longer-term trend management, deliver high-quality care and an optimal consumer experience.

ACO providers may offer extra services or assistance for patients who are a part of the ACO. They also work closely with the health plan to focus on preventive care and management of chronic diseases.

How do I know if an ACO is right for my organization?

One factor to consider is the geographic location of your employees. Depending on where you are in the country, an ACO approach can be very different. In Minnesota, our market is uniquely structured to benefit from arrangements like this because we have a handful of large care systems who offer a lot of options for employees. 

It’s also important to consider where your employees are currently getting care. Are the care systems that your employees are using today cost-effective? If you’re not sure how to find this out, you can work with your health plan provider to analyze where your employees are going and how much you’re spending on care.

An ACO may be offered in a variety of plan designs. Here is a breakdown of the HealthPartners product options and what to consider when choosing the best fit for your organization.

 ACO onlyCore / Buy upTieredMarketplace
DefinitionOffered as a standalone plan optionACO plan offered alongside a broad open access planOne plan with benefit levels to steer members into the ACOSelection of ACO plans on a narrow network or tiered platform
Key Points- The plan sponsor enjoys savings from ACO pricing

- May not meet geographic needs or care preferences of all employees
- Selection is factored into pricing of the broad access plan since current patients of the ACO will choose the ACO plan, while others may select the broader network.- ACOs less likely to lower pricing if benefit steerage isn’t enough to warrant lower reimbursement

- Meets employee needs for care options outside of ACO
- All members in a contract select a single ACO. Option to use other care depends on the marketplace model (open access vs. narrow network)

- Employer HR system setup challenges with large number of plan options

ACOs are not going to go away anytime soon. More and more employers are evaluating their health care costs and looking for ways to innovate and save, including network-based solutions like Accountable Care Organizations.  We have seen a number of ACO model startup enterprises over the past few years and can expect them to continue to evolve as the market seeks solutions for care and coverage needs of consumers.

What other questions do you have about health care benefits? Submit them to

  • Senior Director, Product and Market Innovations. Julie Bunde is responsible for developing and managing HealthPartners group and individual commercial plans. Julie has 24 years of health care experience in finance, business development and product development roles. She helps our Employer Academy readers as she translates confusing health care subjects like the Affordable Care Act. She also provides guidance on various plan designs and how you can choose the best (and most affordable) health plan for your workplace.

    See more posts by Julie >

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