Individuals & Families Employers Brokers Physicians Health & Wellness

Value-based Contracting and Accountable Care Organizations

Value-Based Contracting and Accountable Care Organizations

UnitedHealth Network Strategies


UnitedHealthcare is evaluating a variety of value-based contracting strategies to increase quality, reduce medical costs, improve patient outcomes and share risk as well as responsibility for controlling medical cost trend.

UnitedHealthcare considers Accountable Care Organizations (ACOs) to be an important element of its value-based contracting strategy. The goal of value-based contracting is to move the delivery system toward increased collaboration between the health care community and greater emphasis on shared risk accountability for improved outcomes. The transformation of industry-wide payment models is evolving and will require a variety of strategies to suit the needs and diversity of consumers and health care providers in individual communities across the country. UnitedHealthcare is currently pursuing a variety of value-based contracting models from performance based contracting incentives to full capitation. In addition to these historic models, UnitedHealthcare is currently active with one ACO pilot in Tucson, Arizona, and is working on adding eight to 12 pilots across the country by 2012.

The Patient Protection and Affordable Care Act of 2010 contains provisions surrounding the establishment of ACOs under the Medicare Shared Savings Program. Under the final rule issued by the Centers for Medicare & Medicaid Services (CMS), ACOs, defined as a group of physicians, hospitals and other health care professionals working together, would coordinate care and share in certain savings or losses for Medicare beneficiaries assigned to their group. The primary goal of the program is to improve quality while lowering the costs for patients enrolled with CMS in original Medicare (fee-for-service) – Medicare Parts A and B programs. The regulations do not apply to Medicare Advantage plans, Medicaid or private insurers.

The Medicare Shared Savings Program will be established on January 1, 2012.

For More Information

  • Viewpoint: Value-Based Contracting and Accountable Care Organizations
  • News Release: WESTMED Medical Group Launches Accountable Care Organization (ACO) in Collaboration with UnitedHealthcare and Optum (March 20, 2012)
  • News Release: Tucson Medical Center, Independent Area Physicians Establish Region's First Fully Operational Accountable Care Organization (June 9, 2011)

Frequently Asked Questions

What is an Accountable Care Organization (ACO)?

Generally speaking, an ACO is an organization of health care providers, including physicians and/or hospitals, that take on shared responsibility for quality, cost and overall care for a defined patient population. To participate in the Shared Savings Program, ACOs would need to coordinate and manage all of the health care needs of a minimum of 5,000 fee-for-service Medicare beneficiaries for at least three years.

If the CMS regulations only impact original Medicare plans, is there any bearing on the commercial market?

The CMS regulations may be used or referenced by states when developing their own regulatory framework for ACOs, so they may play a role in commercial guidance on structure, operations, reporting and plan designs within an accountable care arrangement.

Are ACOs ready to be sold as a product?

No. At the present time, UnitedHealthcare has not developed an ACO-based product. UnitedHealth Networks is piloting ACOs and is investigating several value-based contracting options that leverage new payment models.

When could ACOs begin operating?

The Medicare Shared Savings Program will begin operating by January 1, 2012 for Medicare beneficiaries. The movement to form ACOs has already taken hold in the industry. Hospitals, physician practices and insurers across the country, from New Hampshire to Arizona, are announcing plans to form ACOs, not only for Medicare beneficiaries, but for patients with private insurance as well.

Do ACOs need to do anything to prepare for managing the risk?

Yes, they will want to ensure they have solid physician leadership, a clear structure for quality and compensation, infrastructure and technology as well as clinical programs and patient engagement capabilities. They will also need to establish that they have the disciplined financial accounting and systems that support the distribution of funds to providers within the ACO based on performance.

What does UnitedHealthcare bring to the ACO?

UnitedHealthcare is working with a variety of provider groups to assess their readiness and capabilities collaboratively. UnitedHealthcare can help provide access to members and clinical information as well key tools to support the effective management and coordination of patient care.

Why did Congress include ACOs in the law?

As lawmakers search for ways to reduce the national deficit, Medicare is a prime target. With baby boomers entering retirement age, the costs of the program for elderly and disabled Americans are expected to soar.

The government's objective is to create an ACO framework that makes providers jointly accountable for the health of their patients, gives them strong incentives to coordinate efforts to improve quality, and drives cost-effectiveness by avoiding unnecessary tests, treatments and procedures. For ACOs to work, providers will have to seamlessly share information. As a result of improved coordination, those groups that save money and meet quality targets will keep a portion of the savings.

The Congressional Budget Office estimates that ACOs could save Medicare at least $4.9 billion through 2019. That would be far less than 1 percent of Medicare spending during that period, but if the program is successful, it can be expanded by the Secretary of Health and Human Services.

Are ACOs a positive approach for health payment reform?

ACOs are an evolution of previous payment models intended to mitigate the rising health care costs. UnitedHealthcare plans to work to ensure entities involved have the ability to deploy collaborative models that realize the benefits of clinical integration (e.g., improved quality of care, increased efficiency and cost reduction) and lowered costs without harming health care consumers and/or competition in violation of antitrust laws.

What other payment models is UnitedHealthcare investigating?

UnitedHealthcare is investigating several value-based contracting options that leverage new payment models:

  • Performance-Based Contracting – Provides opportunities to target specific quality metrics and meet the agreed upon metric targets tying quality outcomes to a potential rate increase in the future.
  • Patient-Centered Medical Homes – A health care setting that facilitates partnerships between individual patients and their personal physicians to ensure that patients get the indicated care when and where they need it.
  • Bundled and Episodic Payments – Phyicians and/or hospitals and facilities receive a lump sum for all health care services delivered for a single episode of care and/or over a specific time period.
  • Risk-Based Compensation/Delivery System Configuration – Provider organizations take accountability for care of a specific population. Payment and risk-bearing methodology is based on achieving quality, cost and patient experience targets.
  • Narrow/Tiered Networks – Products constructed around select physician groups or other providers.
  • Specialty Networks/Centers of Excellence – Defining higher quality and cost-efficient providers based on specific conditions.
What role will UnitedHealthcare play in the evolution of integrated systems and ACOs?

UnitedHealthcare recognizes that we will need to continue our work with physicians, facilities and other health care professionals to increase our joint focus on increased quality and lower cost through enhanced payment models including ACOs and/or other strategies. To that end, we will work with our network to assess providers' current and potential capabilities in the following areas:

  • Ability to grow and retain patient membership.
    • CMS has announced that to be considered an ACO the organization must have at least 5,000 Medicare lives attributed to them.
  • Organizational strength including cohesive governance and established leadership.
  • Focus on and incorporation of clinical programs including wellness, prevention, chronic care, disease management, inpatient case management, outpatient care, and end-of-life care based upon evidence-based guidelines.
  • Proliferation of health information technology
  • A clear financial structure that:
    • Supports disciplined financial accounting and systems, analytics and modeling.
    • Provides mechanisms to effectively and fairly distribute funds to providers based upon performance.
Has UnitedHealthcare seen significant interest from physicians, facilities or health care professionals?

UnitedHealthcare is already receiving inquiries from groups across the country interested in pursuing official ACO status with CMS and/or commercial health plans. Many providers are also actively pursuing other options that expand current relationships and contracts beyond the traditional fee-for-service model.

Why would physicians, facilities and health care professionals agree to accept more risk?

There is industry-wide recognition that the traditional fee-for-service payment model is not sustainable based on the continually increasing costs of health care. Furthermore, the current model is not producing better quality and health outcomes nationally. The assumption is that the right incentives and methods of payment will encourage providers to work together in ways that enable them to take broader responsibility for the patients they treat.

Are ACOs and patient-centered medical homes (PCMH) the same or different?

ACOs and PCMHs are related, but different. Patient-centered medical homes are organized around tighter alignment around patient quality but have not traditionally carried any burden of risk for costs. The emphasis on primary care is a key component and will also be critical to the success of ACOs.

What is UnitedHealthcare currently doing for patient-centered medical homes?

In terms of medical homes, UnitedHealthcare currently has seven patient-centered medical home pilots underway, and one intensive, high-risk chronic pilot. These pilots include 127 medical home practices impacting more than 325,000 lives and including over 836 providers and 636 employer groups.