A Medicare Accountable Care Organization (ACO) is a group of doctors, hospitals, and other health care providers who accept Original Medicare and work together to coordinate your care. The idea is simple: instead of each provider working independently, they share information, communicate about your treatment, and collectively take responsibility for the quality and cost of your care. If they keep you healthier while spending less than expected, they share in the savings. If they don’t, some may owe money back to Medicare.
How an ACO Works in Practice
In traditional Medicare, your primary care doctor, specialists, and hospital don’t have a built-in reason to talk to each other. Each bills separately, and nobody is tracking whether you’re getting duplicate tests or conflicting advice. An ACO changes that dynamic by creating a network where providers share electronic health records and coordinate treatment plans. The practical result: fewer repeated lab tests, less paperwork for you, and providers who actually know what other members of your care team are doing.
ACO providers partner with you on health care decisions rather than making them in isolation. You still have full freedom to see any provider who accepts Medicare. Being part of an ACO doesn’t restrict where you go or who you see. It simply means the providers in your ACO’s network are working together behind the scenes.
Who Can Form or Join an ACO
An ACO can be made up of several types of organizations. The Affordable Care Act, which created the program, allows group practices, networks of individual practices, hospitals that employ physicians, and joint ventures between hospitals and doctors. Critical access hospitals, federally qualified health centers, and rural health clinics can also participate independently. In short, ACOs range from small physician groups to large hospital systems, and they exist in both urban and rural settings.
How You Get Assigned to an ACO
You don’t need to sign up for an ACO. Medicare can assign you to one based on where you receive most of your primary care. If the doctor you see most often participates in an ACO, you’re likely already attributed to it, whether you know it or not.
There is also a voluntary alignment option. Medicare may send you a letter giving you the chance to confirm your main source of primary care, either by returning a paper form or making a selection through your Medicare.gov account. If you complete that form and later change your mind, you can call the ACO or update your selection online, and the online choice takes precedence. You can also choose not to align at all by simply ignoring the form.
The Financial Model Behind ACOs
The main Medicare ACO program is the Medicare Shared Savings Program (MSSP). CMS sets a spending benchmark for each ACO based on the expected cost of caring for its patient population. If the ACO spends less than that benchmark while meeting quality standards, it keeps a percentage of the savings. If it spends more, the consequences depend on which risk level the ACO has chosen.
At the entry levels (known as BASIC Track Levels A and B), the model is one-sided: the ACO can earn up to 40% of the savings it generates, capped at 10% of its benchmark, but owes nothing back if costs exceed the target. This lets newer ACOs test the model without financial downside.
As ACOs mature, they move into two-sided risk. At BASIC Track Levels C through E, the savings rate increases to 50%, but the ACO also becomes responsible for losses. At Level C, the ACO repays 30% of losses up to 2% of its revenue. At Level E, that exposure grows to 30% of losses up to 8% of revenue. The highest tier, the ENHANCED Track, carries the greatest potential reward and the steepest financial penalties. This graduated structure pushes ACOs to accept more accountability over time.
How Quality Is Measured
Saving money alone isn’t enough to earn shared savings. ACOs must also meet quality performance standards across several categories: clinical outcomes like blood pressure and blood sugar control, process measures like whether appropriate screenings were completed, patient experience scores from surveys, and efficiency measures related to resource use. There are also measures tracking patient-reported outcomes, such as improvements in physical function.
Performance is scored on a scale of deciles, comparing each ACO against national benchmarks. For example, on a blood pressure control measure, an ACO in the top decile would need 90% or more of its patients at goal, while the lowest decile starts below 10%. An ACO’s overall quality score directly affects how much of the shared savings it actually receives. Poor quality performance can reduce or eliminate the financial bonus entirely. Starting recently, CMS also factors in a health equity adjustment, rewarding ACOs that serve underserved populations well.
ACO REACH: A Different Model
Alongside the Shared Savings Program, CMS runs a separate model called ACO REACH (Realizing Equity, Access, and Community Health). It shares the same basic philosophy of coordinated, accountable care but differs in several important ways.
ACO REACH places a stronger emphasis on health equity. Participating organizations must develop a formal health equity plan, collect demographic and social determinants of health data on their patients, and receive benchmark adjustments for serving underserved communities. The governance rules are also stricter: ACO REACH boards must include both a patient representative and a separate consumer advocate with full voting rights, whereas MSSP requires only one patient representative.
The biggest structural difference is in payment. ACO REACH offers capitated payment options, meaning providers can receive a set amount per patient rather than billing for each individual service. This is a significant departure from the fee-for-service structure that MSSP preserves. ACO REACH also uses specific tools to control “coding intensity,” preventing organizations from inflating patient risk scores to game their benchmarks.
Your Rights Around Data Sharing
When you’re attributed to an ACO, Medicare may share your claims data with that organization so it can coordinate your care and track quality. This includes information about your visits, procedures, and diagnoses. Federal regulations require your ACO to notify you that this data sharing is happening and to tell you how to opt out.
If you prefer not to have your claims data shared, you can contact CMS directly to decline. That preference stays in effect until you actively change it. Opting out of data sharing doesn’t remove you from the ACO or affect your Medicare benefits in any way. It simply limits the information the ACO can access about your care history.
What This Means If You Have Original Medicare
If your primary care provider participates in an ACO, your day-to-day experience with Medicare likely won’t feel dramatically different. You keep your same doctors, you can still see any Medicare-accepting provider, and your covered benefits don’t change. The differences happen mostly behind the scenes: better communication between your providers, more attention to preventive care, and a financial structure that rewards keeping you healthy rather than ordering more services.
Over 10 million Medicare beneficiaries are currently attributed to ACOs through the Shared Savings Program alone. The model has become one of Medicare’s primary strategies for controlling costs while improving care quality, and it continues to expand as more provider groups take on accountability for the patients they serve.