What defines an Accountable Care Organization (ACO) and its shared-savings mechanism?

• A. An ACO is a network of providers coordinating care; if quality and cost targets are met, they share savings with payers.
• B. An ACO is a hospital department focused on coding accuracy.
• C. An ACO pays providers a fixed salary regardless of outcomes.
• D. An ACO operates only within inpatient hospital settings.

Answer: (C)

An Accountable Care Organization is a network of providers who coordinate care for a defined population and take collective responsibility for both quality and total costs. The shared-savings mechanism works by comparing actual spending and quality performance to pre-set benchmarks. If the ACO delivers care below the cost benchmark and meets quality targets, the payer shares a portion of the savings with the ACO members. If spending exceeds the target or quality targets aren’t met, there may be no savings or even a loss, depending on the arrangement. This setup encourages better care coordination, fewer duplicative tests, and smoother care transitions across settings—primary care, specialty care, hospitals, and post-acute care. Fixed salaries regardless of outcomes wouldn’t incentivize cost or quality improvements; focusing only on inpatient settings misses the broader scope of coordinated care; and a department focused on coding accuracy isn’t what defines an ACO.