Accountable care organizations (ACOs) are groups of health care providers responsible for providing coordinated, high-quality care while managing costs of care for a defined population. ACOs typically operate under a value-based payment (VBP) model, which shifts the focus from incentivizing volume of services to incentivizing the value of care provided. ACOs gained popularity through Medicare beginning in the early 2010s driven by the Affordable Care Act’s establishment of the Medicare Shared Savings program and the CMS Innovation Center, which piloted additional ACO models. Over time, many states and provider organizations have also implemented ACO models for Medicaid populations.

How do Medicaid accountable care organizations work?

Medicaid ACOs vary in structure and governance, priorities for improving care quality, and payment methods. Typically, ACOs are provider-led organizations paid through shared savings/risk arrangements covering a broad range of health services. State definitions of ACOs and requirements for participation in Medicaid ACO programs vary. Generally, many different types of providers can form ACOs, including health systems, primary care provider organizations, and federally qualified health centers. Shared-savings arrangements are a type of VBP model where a payer sets a target cost of care benchmark for a defined set of services. Providers receive a share of savings if health costs for their population are below that benchmark and they achieve quality performance targets. Sometimes, providers are also accountable for shared risk, meaning they owe a portion of excess costs to the payer if spending for their population is above the benchmark.

How can Medicaid accountable care organizations support populations with complex health and social needs?

ACO models create opportunities to support individuals with complex health and social needs by shifting payment incentives to better support high-quality care. The predominant fee-for-service (FSS) payment system incentivizes providers to deliver a high volume of services but often undercompensates and fails to encourage coordination of care across traditional health care silos, preventive care, and other approaches to managing population health. In contrast, the VBP model adopted by most Medicaid ACOs includes explicit incentives to improve care quality and manage costs. As a result, ACOs are well-positioned to implement new approaches to care, such as enhancing care coordination, integrating behavioral and physical health, and developing strategies to address health-related social needs. While ACO models can benefit a wide range of patients, they may be particularly advantageous for populations with complex needs, as these patients interact more with the health system and are most at risk of being harmed by uncoordinated care.

What is the policy landscape for Medicaid accountable care organizations?

There is no single agreed-upon definition for ACOs, which makes it challenging to define the prevalence of ACO adoption within Medicaid. That said, as of 2022, 11 states report having ACOs in place. State Medicaid agencies take different approaches to designing and incentivizing ACO adoption. Some Medicaid agencies develop ACO programs with detailed parameters, such as governance and structural requirements, care delivery standards, and payment models for participating ACOs. Other Medicaid agencies may be less prescriptive but still encourage ACO formation by incentivizing managed care organizations (MCOs) to enter into VBP arrangements with providers or by offering a menu of VBP options, including ACO-type models. In states without explicit policies or programs related to ACO adoption, individual providers may still have opportunities to form ACOs and enter into VBP arrangements with MCOs.

What is the evidence behind Medicaid accountable care organizations?

Evidence on the impact of Medicaid ACOs is mixed, although some studies show positive outcomes related to health care quality and utilization. Studying the impact of Medicaid ACOs is challenging, including variations in ACO design and implementation. Additionally, because studies on Medicaid ACOs focus on a handful of states, it is unclear how generalizable the results are to other state contexts. Following are select studies that may inform Medicaid stakeholders seeking to pursue an ACO strategy:

• The Impact of Medicaid Accountable Care Organizations on Health Care Utilization, Quality Measures, Health Outcomes and Costs from 2012 to 2023: A Scoping Review: This review assessed 32 studies on Medicaid ACOs’ impacts on health care utilization, quality, outcomes, and cost. Overall results were mixed. Studies with significant, positive results often noted increased primary care visits, fewer admissions, and shorter inpatient stays.
• Realizing the Potential of Accountable Care in Medicaid: This brief reviews 30 studies on ACO impact and summarizes 16 interviews with Medicaid agency and provider organization staff about enablers and barriers to Medicaid ACO adoption. Positive impacts were most frequently found related to quality improvement and reduced preventable utilization. While less common, positive impacts were also found related to cost savings and reducing health disparities.

What do Medicaid accountable care organizations look like in practice?

The following resources offer insights into how Medicaid ACO programs are designed and implemented. Much of the recent research on Medicaid ACOs focuses on the impact and lessons of the Massachusetts Medicaid model. 

• Integration on the Frontlines of Medicaid Accountable Care Organizations and Associations with Perceived Care Quality, Health Equity, and Satisfaction and How Medicaid Delivery System Reform Can Support Care Integration for Populations with Complex Needs: This paper and related blog post explore how Medicaid ACOs support care integration at the primary care practice level. The study found that care integration varies by primary care practice type and measure of integration, and that care integration is associated with greater perceived ability to improve care quality.
• Trade-Offs in Locational Choices for Care Coordination Resources in Accountable Care Organizations: This study surveyed Massachusetts Medicaid ACOs to examine how the location and management structure of care coordinators within ACOs affect quality and coordination. Embedding care coordinators in practice sites was associated with enhanced quality, while centralizing care coordinators was associated with greater clinical information sharing.
• ACO and Social Service Organization Partnerships: Payment, Challenges, and Perspectives: This article shares insights from leaders in Massachusetts’ Medicaid ACO program, including their approach to addressing health-related social needs, the payment mechanisms used in partnerships with social service organizations, and the challenges and impacts of these partnerships.
• Health Care Spending and Use Among People Experiencing Unstable Housing in the Era of Accountable Care Organizations: Using Massachusetts Medicaid claims data, this study found that individuals experiencing homelessness had health care spending 2.5 times higher than those with stable housing, including greater spending on outpatient care, inpatient care, and prescription drugs.
• Integrated Health Partnerships — Minnesota’s Medicaid Accountable Care Organization Model: This blog post provides an overview of the purpose and design of Minnesota’s Medicaid ACO program, including its efforts to reduce health disparities.
• Leveraging Medicaid Accountable Care Organizations to Address Health Equity — Examples from States: This report describes examples of how state ACO incentives and requirements may be used to advance health equity.

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