Which statement best describes ACOs?

• A. They are insurance carriers
• B. They are a contract with payers not an insurer
• C. They replace hospitals
• D. They are patient groups

Answer: (B)

ACOs are networks of physicians, hospitals, and other providers that voluntarily come together to take responsibility for the quality and total cost of care for a defined group of patients. They operate under a contract with payers (such as Medicare, Medicaid, or private insurers) to coordinate care and share any savings or losses based on performance. They are not insurance carriers themselves, so they don’t issue policies or collect premiums. They don’t replace hospitals, and they aren’t simply patient groups—the patients are attributed to the ACO for measurement, while the ACO’s role is to organize care and manage costs under the payer contract. In practice, ACOs can earn a portion of savings if they meet specified quality and spending targets, and may assume some financial risk under certain models.