An Actuarial Perspective on Accountable Care Organizations

Mary Downs, Executive Director Craig Hanna, Director of Public Policy Cori Uccello, Senior Health Fellow Heather Jerbi, Senior Health Policy Analyst An Actuarial Perspective on Accountable Care Organizations The Affordable Care Act (ACA) and regulations implementing it incorporate a concept that some health reform proponents have advocated for several years: an Accountable Care Organization (ACO). There are now hundreds of ACOs across the country in both the public and private sector. An ACO is a group of health care providers, such as physicians and hospitals, that work together to manage and coordinate care for a group of patients—across the entire spectrum of care for those patients—and accept responsibility for the quality and cost of that care. The ACO structure is intended to encourage more integrated care for patients, resulting in quality improvements and reduced costs. Under many arrangements, including the new Pioneer ACO program and Medicare Shared Savings program (MSSP), if an ACO achieves a benchmark level of cost savings while maintaining a measurably high quality level, the ACO shares in the cost savings. The ACO concept and other approaches, such as patient-centered medical homes (PCMHs), are being researched and piloted by health care providers. To succeed in achieving their financial goals, these programs need to focus on measurement and certain key actuarial issues. The American Academy of Actuaries’ Health Care Quality Work Group has developed this issue brief to provide an actuarial overview of ACOs and outline a number of issues that stakeholders should evaluate as ACOs are implemented. MARCH 2009 American Academy of Actuaries