By Lynn Carroll and David Wolf

Accountable Care Organizations (ACOs) are increasing in popularity as healthcare organizations strive to improve care quality and operational efficiency. Data from the Centers for Medicare and Medicaid Services (CMS) shows that more Medicare patients than ever – nearly 13.4 million beneficiaries – are being cared for by ACOs this year. The largest ACOs serve Medicare recipient populations in the hundreds of thousands.

For ACOs and other risk-bearing providers, the emphasis on preventive care in Value-based Care (VBC) enables a healthier overall population. Preventive care is particularly impactful in the management of chronic conditions by helping to reduce claims for prolonged and expensive treatments. Chronic illnesses (including Alzheimer’s disease, cancer, diabetes, heart disease, and obesity) together account for 90% of healthcare costs in the U.S., according to data from the Centers for Disease Control and Prevention (CDC).

Critically, ACOs are financially accountable under the Medicare ACO program for the quality and cost of patient care they provide. ACOs in the Medicare Shared Savings Program (MSSP) or the Next Generation ACO Model can share savings with the government if they meet certain quality targets. MSSP saved Medicare $4.3 billion in 2022, with nearly two-thirds of the 482 ACOs in the program earning shared savings.

Medicare also offers shared-risk ACO models under which ACOs cannot only share savings with the government if they meet specified quality standards, but also would bear some financial risk should spending increase beyond a certain amount. In an industry where provider margins are thin, any risk poses a threat to an organization’s viability to sustainably deliver quality care and maintain a high standard of services.

For ACOs and other risk-bearing organizations, effective contract management in a VBC environment is imperative. Collaborative shared-savings and shared-risk organizations must be able to transmit and receive data within a scalable, multistakeholder network and facilitate payment capabilities across that network.

Indeed, transparency around payments is critical to the success of ACOs and other VBC models. It ensures a shared understanding and clarity around what is being measured, how it’s being measured, and the terms of the contract. Unfortunately, the limitations of legacy IT infrastructures long deployed by provider organizations make transparency around payments, data sharing, and collaborative care difficult and even impossible.

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