Accountable Care Organizations and Care Management
Accountable Care Organizations (ACOs) represent a federally recognized payment and delivery model in which groups of physicians, hospitals, and other health care providers coordinate care for a defined patient population with shared financial accountability for outcomes and costs. This page covers the structural definition of ACOs under federal statute, the operational mechanisms through which care management is embedded within ACO frameworks, the clinical scenarios where ACO-based care coordination activates, and the boundaries that distinguish ACO care management from adjacent models. Understanding how ACOs function is foundational for health care professionals working in value-based care and care management contexts.
Definition and scope
An Accountable Care Organization is formally defined under Section 3022 of the Affordable Care Act (ACA), which established the Medicare Shared Savings Program (MSSP) — the primary federal ACO pathway administered by the Centers for Medicare & Medicaid Services (CMS). Under MSSP rules, an ACO must serve a minimum of 5,000 attributed Medicare beneficiaries to participate. CMS recognizes multiple ACO tracks, including the BASIC track (with glide-path levels A through E) and the ENHANCED track, which differ by the degree of financial risk assumed and the magnitude of shared savings or losses.
Beyond Medicare, ACOs operate under Medicaid waiver authority (42 C.F.R. Part 438) and through commercial insurance contracts, though the regulatory scaffolding is most codified in the federal Medicare context. As amended effective February 25, 2026, 42 C.F.R. Part 438 reflects updated managed care requirements that affect how Medicaid ACO arrangements are structured, including strengthened provisions governing access standards, network adequacy, managed care plan accountability, and beneficiary protections. Entities operating Medicaid ACO arrangements should ensure their governance structures, care management protocols, and contractual frameworks are aligned with the current text of Part 438 as it stands following the February 25, 2026 amendment. The Department of Health and Human Services (HHS) Office of Inspector General and the Federal Trade Commission have published joint guidance governing ACO antitrust safety zones, given that ACOs require collaboration among entities that would otherwise compete.
Care management is not incidental to ACO design — it is a structural requirement. CMS MSSP program specifications mandate that ACOs have processes for patient-centered care planning, risk stratification in care management, and coordination across the care continuum. The ACO's quality performance, measured against a set of CMS-defined metrics, directly determines the proportion of shared savings the organization retains.
How it works
ACO care management operates through a layered process that connects attribution, stratification, intervention, and performance reporting:
- Beneficiary attribution — CMS assigns Medicare beneficiaries to an ACO based on plurality of primary care visits. Beneficiaries are not enrolled; they are attributed retrospectively or prospectively depending on the ACO track.
- Risk stratification — The ACO applies clinical and claims-based algorithms to segment the attributed population by cost and complexity risk. High-risk individuals are typically routed into intensive complex care management programs; moderate-risk individuals receive disease-specific programs such as diabetes care management or cardiovascular care management.
- Care team activation — Interdisciplinary care teams — composed of primary care physicians, registered nurses, social workers, and care coordinators — execute individualized care plans. CMS billing codes, including Chronic Care Management (CPT 99490 series) and Transitional Care Management (CPT 99495/99496), provide the reimbursement mechanism for these services.
- Health IT integration — ACOs rely on shared data infrastructure. CMS provides ACOs with aggregated claims data under a formal data sharing agreement, enabling the ACO to identify gaps in care that the individual practice cannot see in isolation. Health information technology in care management platforms aggregate this data for care manager use.
- Quality reporting — ACOs submit performance data against CMS-defined quality measures. As of the 2023 MSSP rule (88 Fed. Reg. 44000), CMS moved ACOs to a Medicare Shared Savings Program quality performance pathway centered on the Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey and clinical outcome measures.
- Shared savings distribution — If total spending for the attributed population falls below the CMS-set benchmark, the ACO retains a negotiated percentage of the savings. Under the ENHANCED track, ACOs may retain up to 75% of shared savings but also absorb a share of losses.
Common scenarios
ACO care management activates across a defined set of clinical and operational scenarios:
- Post-acute transitions — After a hospital admission, ACO care managers coordinate discharge planning and post-acute care to reduce 30-day readmission rates, a domain CMS tracks under the Hospital Readmissions Reduction Program.
- Chronic disease populations — Attributed beneficiaries with two or more chronic conditions are priority targets for ACO-based Chronic Care Management billing. Chronic disease care management protocols within ACOs address conditions including heart failure, COPD, and type 2 diabetes.
- Behavioral health integration — ACOs incorporating behavioral health care management address co-occurring mental health and substance use conditions, which CMS data consistently links to elevated total cost of care.
- Social determinants screening — CMS quality measure sets increasingly include health-related social needs. ACOs embed social determinants of health in care management screening into primary care workflows to address food insecurity, housing instability, and transportation barriers.
- High-utilizer management — Beneficiaries with six or more emergency department visits in a 12-month period are frequently identified for ACO-directed case management intervention.
Decision boundaries
ACOs are distinct from — and should not be conflated with — adjacent organizational models. The table below clarifies key classification lines:
| Feature | ACO (MSSP) | Health Maintenance Organization (HMO) | Patient-Centered Medical Home (PCMH) |
|---|---|---|---|
| Beneficiary enrollment required | No (attribution-based) | Yes | No |
| Provider financial risk | Shared (track-dependent) | Full capitation | None (quality incentive only) |
| Federal regulatory basis | ACA §3022 / 42 C.F.R. Part 425 | ERISA / state insurance law | NCQA standards |
| Care management mandate | Yes (CMS program requirement) | Plan-defined | Yes (NCQA PCMH standards) |
An ACO does not restrict beneficiary choice of provider — Medicare beneficiaries retain freedom to seek care outside ACO-affiliated providers. This distinguishes the ACO from an HMO network model. Conversely, a PCMH is a practice-level designation issued by bodies such as the National Committee for Quality Assurance (NCQA), operating without population-level financial risk. ACOs may contain PCMH-recognized practices within their network but the two designations operate on different regulatory and contractual planes.
Under 42 C.F.R. Part 425, CMS sets the compliance requirements for ACO governance, including the mandate that an ACO must have a governing body in which Medicare beneficiaries hold at least one seat. ACO care management programs that bill Chronic Care Management codes must also meet the conditions outlined in the CMS Chronic Care Management Services FAQs and the applicable Medicare Benefit Policy Manual chapters, which specify the 20-minute minimum monthly contact threshold and the requirement for a comprehensive care plan. For professionals working across care management regulatory compliance functions, these billing compliance requirements are distinct from the ACO's shared savings agreement obligations.
References
- Centers for Medicare & Medicaid Services — Medicare Shared Savings Program
- 42 C.F.R. Part 425 — Medicare Shared Savings Program (eCFR)
- 42 C.F.R. Part 438 — Managed Care, as amended eff. February 25, 2026 (eCFR)
- Affordable Care Act, Section 3022 — HHS
- Federal Register Vol. 88 No. 130 — CY 2024 Physician Fee Schedule Final Rule (88 Fed. Reg. 44000)
- National Committee for Quality Assurance (NCQA) — Patient-Centered Medical Home
- HHS Office of Inspector General — ACO Fraud and Abuse Waivers
- Federal Trade Commission — Statement of Antitrust Enforcement Policy Regarding ACOs