What is "shared savings" in relation to Accountable Care Organizations (ACOs)?

Shared savings in relation to Accountable Care Organizations (ACOs) refers to a financial incentive mechanism designed to align the goals of healthcare providers with the broader objectives of improving quality while managing costs. When ACOs effectively coordinate care and reduce unnecessary spending, they generate savings for the Medicare program. These savings can then be shared with the ACO as a reward for their efficiency and quality of care.

The concept is grounded in fostering collaboration among healthcare providers, encouraging them to deliver higher-quality care while keeping expenditures in check. This ultimately aims to enhance patient outcomes by focusing on preventive care, reducing hospital admissions, and managing chronic conditions more effectively.

This approach contrasts sharply with penalty mechanisms or limitations on services, which do not promote care coordination or quality improvements. Instead, shared savings incentivizes providers to find innovative solutions to deliver care more efficiently and effectively, making it a cornerstone of ACO operation and patient-centered care.