ACO Vs. MCO: Understanding the Key Differences

January 24, 2025
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As health care systems increasingly focus on cost management and patient outcomes, many primary care organizations are exploring different care models. Two of the most common frameworks are Accountable Care Organizations (ACOs) and Managed Care Organizations (MCOs). To effectively transition to value-based primary care, understanding the differences between these models is key.

Overview of ACOs and MCOs

Both ACOs and MCOs play key roles in health care; however, they operate with different goals and structures.

  • ACOs are groups of health care clinicians who come together voluntarily to provide coordinated, high-quality care to their patients. Members focus on improving patient outcomes while reducing costs by avoiding unnecessary services and preventing medical errors. ACOs in health care are a foundational element of value-based care.
  • MCOs are insurance companies or networks of clinicians contracted to deliver health care services to a defined patient population. MCOs in health care aim to manage costs by creating networks of clinicians, overseeing access to specialists and using approval processes for specific treatments or procedures.

Key differences between ACOs and MCOs

Although both ACOs and MCOs aim to enhance patient outcomes while controlling health care costs, they differ significantly in their structure, approach to care coordination and payment models.

Care coordination

  • ACO: The primary goal of an ACO is to coordinate care among multiple clinicians, ensuring that patients receive the right care at the right time. By improving collaboration between health care professionals, ACOs reduce duplication of services.
  • MCO: In contrast, MCOs focus on managing health care costs by maintaining control over patient access to clinicians. This is done through a predefined network of clinicians and by requiring prior approvals for certain treatments.

Incentives

  • ACO: ACOs incentivize health care professionals to improve patient outcomes while controlling costs. Clinicians are rewarded based on the quality and efficiency of care, often through shared savings models.
  • MCO: MCOs operate on a fee-for-service or capitated basis, with a strong emphasis on cost control. Clinicians receive set payments per patient or procedure.

Patient-centered approach

  • ACO: ACOs are designed to prioritize patient outcomes and continuity of care. They aim to keep patients healthier by focusing on preventive care and proactive management of chronic conditions instead of reactive.
  • MCO: While MCOs also aim to improve care, their primary focus is on managing the financial risks associated with health care delivery. This can limit access to specialized care in favor of cost-effective options.

Benefits and challenges

One of the major benefits of ACOs is the focus on improving care quality. This proactive approach often results in significant cost savings, reducing hospitalizations and emergency visits by better managing patient care.

However, there are also challenges associated with ACOs. Successfully implementing an ACO requires extensive coordination among health care professionals, which can be a complex and resource-intensive process. Additionally, there are often upfront investments needed for data systems and infrastructure to track and manage patient outcomes effectively. Another challenge is the financial risk-sharing aspect, where primary care organizations may face penalties for overspending or failing to meet established quality benchmarks.

MCOs offer several advantages, particularly in terms of cost management. For patients, MCOs often result in lower out-of-pocket expenses due to negotiated rates with clinicians and more control over access to expensive services. Clinicians also benefit from predictable payment structures, whether through capitation or fee-for-service models, offering financial stability.

Despite these benefits, MCOs have their share of challenges. One significant drawback is the potential limitation on patient choice, as MCOs may restrict access to certain clinicians or treatments, especially for specialized care. Additionally, the strong focus on cost control can sometimes lead to reduced emphasis on patient-centered care, potentially limiting treatment options in favor of more cost-effective alternatives.

Aledade can help you navigate ACOs Vs. MCOs

It’s important to weigh the pros and cons of both ACOs and MCOs when considering which model aligns best with your organization’s care goals and financial structures. To explore how an accountable care organization can help you transition to value-based primary care, talk with us today.