Learn The Lingo

Learn the Lingo: Key Terms for Navigating the Value Based Care World

With the shift toward value-based payment models, pharmacists are seizing new opportunities to improve patient care in medical homes, accountable care organizations, and other innovative care models. This resource includes acronyms and terminology commonly used when practicing in or discussing innovative practice models. Each term includes a short description and references so you can further your practice in a value based care world. This is the first of multiple volumes that will be published by the Medical Home/ACO SIG.

Angel Baltimore
/ Categories: Learn the Lingo

Accountable Care Organization (ACO)

Definition: ACOs are groups of health care providers and hospitals who partner together to provide high-quality, coordinated care and decrease overall health care costs for a defined population, with the goal of sharing these cost savings.1 The first Medicare ACOs were approved as part of the Affordable Care Act in 2009. In April 2015, Congress signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) into law, which shifted payment from a primarily fee-for-service (FFS) model toward a value-based payment model.2 One of MACRA’s model tracks are APMs, including ACOs.

How it relates to ACO/PCMH: Payers define contract length, minimum number of beneficiaries required, and the quality metrics that must be met in order to share in cost savings. Patients are typically attributed (or assigned) to the ACO based on claims data. The ACO is then responsible for the care of all attributed patients, not just those who are actively seeking acute care. Cost savings can be shared based on one-sided shared savings arrangements, in which the organization has no penalty if benchmarks are not met, or two-sided shared savings arrangements in which providers share both savings and losses. Two-sided risk models typically make the organization eligible for higher sharing rates.

Involved organizations/oversight: ACO programs are available through CMS and private payers. There are 2 types of ACOs in the Medicare program. The Medicare Shared Savings Program (MSSP) allows an approved ACO to be accountable for health care services to Medicare FFS beneficiaries traditionally covered by Medicare Part A (hospitalizations) and Part B (outpatient) services. It is important to note that prescription drugs (Medicare Part D) are not included in Medicare ACO coverage. The Center for Medicare and Medicaid Innovation (CMMI) is also testing various innovative ACO models.


  1. CMS. Accountable care organizations: general knowledge. Available at:
  2. AAFP. Accountable care organizations. Available at:

Contributing author:

Kelli Barnes, PharmD, BCACP
The Ohio State University General Internal Medicine Clinics

Last Updated 1/24/2019

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