Accountable care organizations (ACOs), once compared to mythical creatures, are now a widespread reality, with roughly 750 ACOs serving 23.5 million Medicare, Medicaid, and commercially insured patients across the United States. These models are designed to improve quality of care and reduce costs through a combination of delivery system reforms and value-based payment methodologies. While not all ACOs have been successful at realizing these goals, some clearly have. ACOs participating in the Medicare Shared Savings Program, Pioneer ACO program, state Medicaid ACO programs, and some commercial arrangements have achieved significant savings while improving quality of care and patient experience.

The Robert Wood Johnson Foundation (RWJF) has been seeking answers to the question of “what makes ACOs successful?” This research has shown that some ACOs have become very adept at managing the health of their patient populations and predicting future costs. ACOs are becoming smarter about ways to administer their networks and about patient referral patterns to specialists or other providers. Safety-net ACOs in particular have shown potential in addressing complex, upstream health issues associated with the social determinants of health while reducing costs. In addition, promising models such as Oregon’s Coordinated Care Organizations and five physician organizations in California that have formed ACO-like entities, offer key insights regarding the core elements of a successful ACO. These include the importance of developing electronic health record functionality, establishing enhanced care management capabilities, and forming effective partnerships.

To further explore emerging opportunities for ACOs, the RWJF and the Center for Health Care Strategies convened ACO leaders, researchers, and subject matter experts from across the country this past July.

Key ACO trends

Several key trends surfaced during our discussion. Most ACOs are specifically focused on improving care and costs for high-need, high-cost patients, who often have unmet behavioral health or social needs. Additionally, some ACOs specialize in specific age groups or conditions, such as children or patients with end-stage renal disease. ACOs across the board are working on better ways to share data across partner organizations; analyze patient data, including nonmedical information; use predictive modeling to develop tailored interventions for patients; and improve primary care capabilities within their networks.

ACOs are also using data to think critically about their provider networks and are refining their referral patterns to encourage appropriate, high-quality, and low-cost care for their patients. Many providers are also adapting to the shift toward value-based payment and the increase in health plan mergers by consolidating to form larger ACO entities and achieve economies of scale. Also, some smaller organizations and rural providers are using technology (such as telehealth) to create virtual ACO arrangements to build their service offerings and share resources.

Opportunities to help ACOs realize their promise

Despite positive performance by some ACOs, there are still many barriers to overcome. ACOs face challenges related to creating sustainable financial models; aligning models and measures across payers and programs; working across care settings and provider organizations; engaging patients; measuring health outcomes effectively; and sharing data.

Foundations and others can partner with policy makers and researchers to play a critical role in addressing these barriers and supporting the evolution of promising ACO models. Potential opportunities for funders include the following:

  1. Encouraging movement toward greater accountability. Experts still grapple with the question of what ACOs are really accountable for. There is a need to clarify goals (for example, cost reduction, quality and value improvement, transfer of risk to providers) and to use these insights to drive accountability. There is also a push for payment models and accountability metrics that encourage a broad scope of services, reduce disparities, and promote community partnerships.
  2. Breaking down policy and regulatory barriers. Barriers exist that inhibit optimal ACO data sharing, such as privacy regulations, software interoperability, and regulations limiting how Medicaid funding can be used to address the social determinants of health. Minimizing these barriers may help ACOs and their partners to create more efficient and innovative ways to serve patients.
  3. Facilitating multipayer alignment. Support for alignment—for example, aligning payment methodologies with quality measurement and reporting requirements, but also aligning efforts across payers and programs—may help ACOs develop more population-based models, reduce measurement confusion, and increase provider participation.
  4. Refining risk adjustment across populations and services. More accurate risk adjustment methods that include factors like the social determinants of health could make ACOs better able to bear more financial risk and to support population-based models, particularly for people dependent on the safety net.
  5. Managing market consolidation. Additional research is needed to determine the effects of ACO arrangements on market consolidation. The results from such research could inform future regulatory or other market action that may be taken by state or federal governments, if they felt it was warranted.
  6. Encouraging greater patient engagement in care. Funding could be used for research or pilot projects to improve patient engagement. More specifically, foundations could explore ways that well-designed incentives might promote shared decision making and greater self-care management.
  7. Improving measurement of ACO success. Randomized controlled trials and other formal, but more feasible, methods of evaluating ACO interventions and performance relative to non-ACO activity could help to identify key factors in ACO success and lead to adoption of more scalable models.

What’s next?

While the jury is still out on long-term ACO success, the movement toward accountable care shows no signs of abating. In fact, the development and implementation of Alternative Payment Models and the Merit-Based Incentive Payment System by the Centers for Medicare and Medicaid Services in the next few years are likely to further accelerate growth. For this reason, and given the early positive signals coming from leading ACOs, it remains crucial to better understand, systematically assess, and broadly share promising strategies to encourage wider-spread adoption.

Similarly, it is important to confront on-the-ground challenges and to address mismatches between what ACOs are accountable for and the kind of delivery system changes that we as a nation are trying to achieve.

Policy makers, researchers, and funders all have critical roles in helping ACOs achieve their potential to reform health care delivery in the United States and promote an overall culture of health in their communities.