A coordinated care organization (CCO) is a type of health plan created by the state of Oregon in 2012 to manage care for people enrolled in Medicaid, the state’s publicly funded health insurance program. CCOs are locally governed networks of providers that bundle physical health, mental health, addiction treatment, and dental services under a single organization with a fixed budget. The model is unique to Oregon and serves close to one million people across the state.
How CCOs Work
A CCO functions as a regional health authority responsible for nearly every aspect of a member’s care. Rather than having separate systems for physical health, behavioral health, and dental care, a CCO integrates all three under one roof. Each CCO is made up of insurance plans, hospitals, clinics, dentists, and mental health providers who agree to work together and share financial responsibility for the health of their enrolled population.
Oregon currently operates multiple CCOs across the state, and they vary significantly in size. Some cover fewer than 11,000 enrollees in rural areas, while others serve more than 200,000 people in larger metro regions. The organizations are a mix of for-profit and not-for-profit entities. Some evolved from older Medicaid managed care plans, while others formed through entirely new partnerships between providers and community organizations.
The Global Budget Model
The defining financial feature of a CCO is its global budget. The state pays each CCO a single, risk-adjusted sum meant to cover all expected health spending for its enrolled population over a set period. This is fundamentally different from traditional fee-for-service medicine, where providers are paid per visit or procedure and have a financial incentive to deliver more care, not necessarily better care.
Within that global budget, CCOs have wide flexibility in how they spend. They are not limited to services that fit a narrow definition of “medically necessary.” This means a CCO can invest in things like housing assistance or air conditioning for a member with asthma if those investments are likely to prevent more expensive medical care down the line. The tradeoff: CCOs accept both upside and downside financial risk. If they spend wisely and keep people healthy, they retain savings. If costs exceed the budget, they absorb the loss.
When Oregon launched this model, the state committed to reducing its annual Medicaid spending growth rate from 5.4% to 3.4% within three years, all without reducing care quality.
How CCOs Differ From ACOs
If you’ve heard of accountable care organizations (ACOs), CCOs share the same DNA. Both are locally governed, emphasize primary care, and are held accountable for quality and cost. But CCOs go further in two important ways.
First, CCOs accept full financial risk through their global budget. Most Medicare and commercial ACOs operate with shared savings arrangements where they can earn bonuses for coming in under cost targets but face limited penalties for going over. CCOs bear the entire financial consequence in both directions. Second, CCOs are required to integrate behavioral health, addiction services, and dental care into their delivery system. Most ACOs focus primarily on physical health. This broader scope reflects Oregon’s recognition that mental health and oral health are inseparable from overall health outcomes.
Quality Metrics and Incentive Payments
Oregon doesn’t just hand CCOs a budget and hope for the best. The state withholds a percentage of each CCO’s payment (starting at 2% in the program’s early years and rising to 3%) and places it in an incentive pool. CCOs earn that money back by hitting targets on a set of quality measures. This system is designed to ensure that cost reduction doesn’t come at the expense of patient care.
The quality measures cover a wide range of health priorities:
- Chronic disease management: blood sugar control for people with diabetes
- Preventive care: childhood immunizations, adolescent immunizations, and well-child visits
- Behavioral health: depression screening with follow-up plans, and initiation of substance use disorder treatment
- Maternal health: postpartum care rates
- Oral health: preventive dental services for children ages 1 through 14
- Health equity: meaningful language access for members who speak languages other than English
- Social needs: screening members for social determinants of health and connecting them with referrals
These metrics are updated periodically. CCOs that consistently miss targets face real financial consequences, while high performers are rewarded.
Flexible Services Beyond Medical Care
One of the most distinctive features of the CCO model is its ability to fund non-medical services that directly affect a member’s health. Because the global budget isn’t restricted to traditional clinical care, CCOs can approve a range of practical supports.
Housing-related services are among the most common. CCOs can pay for rent assistance, security deposits, temporary shelter, or hotel stays for members experiencing homelessness. They can fund air conditioners or air filtration devices for members with respiratory conditions, pest removal for unsafe living situations, or even basic appliances like refrigerators and washers. For people living unsheltered, some CCOs provide tents, tarps, and sleeping bags as a bridge to more permanent solutions.
These services are authorized on a case-by-case basis when a CCO determines they will improve a member’s health or prevent costlier medical interventions. A member with poorly controlled diabetes who lacks a working refrigerator to store insulin, for instance, has a clear medical need that a traditional health plan would never address.
Governance and Community Involvement
Oregon requires each CCO to include community voices in its leadership structure. Every CCO’s governing board must include at least two health care providers in active practice (one in primary care and one in mental health or addiction treatment), a representative of the CCO’s dental provider, at least two members from the community at large, and at least two members of a Community Advisory Council (CAC).
The CAC itself is made up of people who are currently enrolled in Medicaid or were enrolled within the past six months, along with parents and caregivers of enrollees. At least one CAC representative on the governing board must be a current Medicaid recipient, and CAC members have full voting rights. This structure is intended to prevent CCOs from making decisions that serve organizational interests over the needs of the people they cover. Members as young as 16 can serve as consumer representatives.
CCO 2.0: The Current Framework
Oregon updated its CCO contracts in a round of reforms known as “CCO 2.0,” which established four priority areas for the program going forward. The first is improving the behavioral health system and removing barriers to integrated care. The second is increasing value by tying more payment to performance. The third is a deeper focus on social determinants of health and health equity. The fourth is maintaining sustainable cost growth over time.
These priorities reflect lessons from the model’s early years, where the clearest gains came in cost control but integration of behavioral health proved more difficult in practice. The CCO 2.0 contracts push organizations to move further from fee-for-service payment within their own provider networks and to invest more deliberately in addressing the non-medical factors that shape health outcomes.