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What is an accountable care organization (ACO)?

Also called: ACO, Medicare Shared Savings Program ACO

An accountable care organization (ACO) is a group of doctors, hospitals and other providers that agree to be jointly accountable for the cost and quality of care for a defined group of patients, sharing in savings when they meet quality and spending targets.

By John Britton, VP of Marketing, MedicalProspects · Updated November 4, 2026 · Healthcare Organizations

Why it matters for healthcare sales and marketing

ACOs are paid partly on outcomes and total cost, so they invest in anything that helps them manage populations: care coordination, remote monitoring, analytics, and programs that reduce avoidable hospital visits. Their leaders are a distinct buyer group for health IT and services vendors.

How it works

  • Who forms them: physician groups, hospitals and health systems, alone or together.
  • Medicare's program: the Medicare Shared Savings Program is CMS's main ACO program; ACOs that meet quality standards and spend less than a benchmark can share in the savings, and some tracks also share losses.
  • Commercial ACOs: similar arrangements exist with private health plans.
  • Who decides: ACO executives, medical directors and population health leaders.
Flow: providers join an ACO, coordinate care for assigned patients, meet quality and cost targets, and share in savings.
ACOs share in savings when they keep quality up and total cost below a benchmark.

Example

Illustrative scenario. A remote patient monitoring company targets ACO medical directors and population health leaders with a program aimed at heart failure readmissions, framing it around the ACO's quality measures and shared savings.

Common mistakes

  • Confusing ACOs with IDNs. An ACO is a payment and accountability arrangement; an IDN is an organization that owns care settings.
  • Pitching cost alone. ACOs also need to meet quality measures.
  • Ignoring the participant mix. Physician-led and hospital-led ACOs have different priorities.

Related terms

  • Value-Based CareValue-based care is a payment approach that rewards healthcare providers for the quality and cost of care rather than only the number of services they deliver, as in traditional fee-for-service.
  • Integrated Delivery Network (IDN)An integrated delivery network (IDN) is an organization that owns or runs several kinds of care settings, typically hospitals, physician groups, outpatient centers and post-acute care, under one parent, usually with shared purchasing, IT and clinical standards.
  • Payer vs ProviderIn healthcare, payers pay for care and providers deliver it. Payers include commercial health plans, Medicare, Medicaid and self-insured employers; providers include hospitals, physician practices, clinics and other care settings.
  • MIPS and MACRAMACRA is the 2015 U.S. law that created Medicare's Quality Payment Program. Its main track, the Merit-based Incentive Payment System (MIPS), adjusts Medicare Part B payments to eligible clinicians up or down based on their performance on quality, cost, improvement activities and interoperability.

Put it to work

Sources

  1. Shared Savings Program, CMS

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