A Comparison of Managed Care Organizations and Accountable Care Organizations

Detailed Definition of Managed Care Organizations (MCOs)

Today, the term Managed Care Organizations (MCOs) is used in reference to healthcare entities that organize, finance, and deliver health care services to a defined population in a specific geographic area. The concept of managed care was introduced in the United States in the 1970s as a way of controlling healthcare costs and ensuring vulnerable members of society could access care much-needed care services. MCOs were, therefore, created as an alternative to traditional fee-for-service healthcare, which was known for being costly and grossly insufficient.

MCOs aim to provide high-quality healthcare services at an affordable cost by coordinating the delivery of care, controlling utilization, and managing risk.

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There are three main types of Managed Care Organizations: Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans. HMOs are the oldest and most common type of MCOs. They are typically organized as a network of healthcare providers that offer services to members for a fixed fee. HMOs usually require members to choose a primary care physician (PCP) who serves as a gatekeeper for all healthcare services. The PCP is responsible for coordinating all healthcare services and referring patients to specialists within the network. HMOs are known for their emphasis on preventive care and are often associated with capitation, a payment model in which providers receive a fixed fee per patient regardless of the amount of care provided (Song et al., 2018). PPOs are another type of MCO that provides members with a network of healthcare providers who have agreed to provide services at a discounted rate. PPOs usually allow members to see providers outside the network, but the cost-sharing may be higher and do not require members to choose a PCP, and referrals are not usually required to see specialists.

Managed Care Organizations have been successful in controlling healthcare costs and improving the quality of care. They have achieved this by using various cost-containment strategies such as utilization review, case management, disease management, and preventive care. Utilization review is the process of evaluating the necessity and appropriateness of healthcare services. Case management is the coordination of healthcare services for patients with complex medical needs. Disease management is the coordination of healthcare services for patients with chronic conditions. Preventive care is the focus on keeping patients healthy and preventing the onset of chronic conditions. One example of a successful MCO is Kaiser Permanente, a California-based health system that operates HMOs in several states. Kaiser Permanente has been successful in providing high-quality healthcare services at a lower cost than traditional fee-for-service healthcare. According to Colla et al. (2016), Kaiser Permanente’s success is due to its emphasis on preventive care, disease management, and the use of electronic health records to coordinate care among providers. Kaiser Permanente also uses a capitation payment model, which aligns provider incentives with patient outcomes. Managed Care Organizations, therefore, serve as critical healthcare entities that organize, finance, and deliver health care services to a defined population in a specific geographic area. MCOs aim to provide high-quality healthcare services at an affordable cost by coordinating the delivery of care.

The Accountable Care Organizations (ACOs)

Accountable Care Organizations (ACOs) are groups of healthcare providers, such as hospitals, primary care physicians, and specialists, who work together to provide coordinated and high-quality care to patients. The primary goal of an ACO is to improve the overall health outcomes of a population of patients, while also reducing healthcare costs. ACOs are responsible for managing the care of a specific group of patients, often those with Medicare coverage, by focusing on preventive care, chronic disease management, and reducing unnecessary hospitalizations and emergency department visits. To achieve these goals, ACOs utilize a variety of strategies, such as implementing care coordination programs, using electronic health records to share patient information, and providing patient education and support. An ideal example of an ACO is the Medicare Shared Savings Program (MSSP), which was established by the Centers for Medicare and Medicaid Services (CMS) as part of the Affordable Care Act  (Kaye & Pantalone, 2017). MSSP ACOs are groups of healthcare providers that are accountable for the care of Medicare beneficiaries, with the goal of improving quality of care while reducing healthcare costs. Participating providers are eligible to receive a share of the savings achieved by the ACO, if certain quality and performance standards are met.

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Similarities and Differences between Managed Care Organizations and Accountable Care Organizations

Managed Care Organizations (MCOs) and Accountable Care Organizations (ACOs) are both healthcare delivery models that aim to provide high-quality, cost-effective care to patients. However, there are some key similarities and differences between these two models that one should always consider in order to gain a better understanding of their roles within the existing healthcare framework.


  • Are cost-effective: Both MCOs and ACOs are designed to manage healthcare costs by improving the quality of care delivered and reducing unnecessary services.
  • Focus on preventative care: Both models place an emphasis on preventative care and early intervention to prevent the development of chronic conditions that require costly treatments.
  • Focus on care coordination: Both models seek to improve care coordination among healthcare providers. This list includes primary care physicians, specialists, and hospitals, to ensure that patients receive the right care at the right time Kash et al., 2014).

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  • Payment structure: MCOs are typically paid on a capitation basis, which means they receive a fixed amount per patient per month regardless of the services provided. ACOs, on the other hand, are paid on a fee-for-service basis, but they may also receive shared savings payments for meeting quality and cost targets Geruso & Layton, 2018).
  • Focus on quality: While both models aim to improve the quality of care delivered, ACOs place a greater emphasis on measuring and improving the quality of care provided by participating providers. MCOs may also measure and report on quality, but they often have more limited metrics and reporting requirements.
  • Patient involvement: ACOs often involve patients more directly in the care process, encouraging them to take an active role in managing their health and working with healthcare providers to develop care plans. MCOs may also involve patients in care planning, but they may not place as much emphasis on patient engagement and education.

Examples of Managed Care Organizations and Accountable Care Organizations

MCOs include UnitedHealthcare, Aetna, and Kaiser Permanente. These organizations typically offer health insurance plans that provide coverage for a defined set of services from a network of providers. Patients are often required to use in-network providers and may need to obtain prior authorization for certain services. On the other hand, ACOs include Medicare Shared Savings Program ACOs and commercial ACOs like Advocate Health Care and Trinity Health (McWilliams et al., 2017). These organizations typically involve a network of providers who work together to coordinate care for patients and meet quality and cost targets. ACOs may also involve patient-centered medical homes, which provide more comprehensive primary care services and help coordinate care across multiple providers.

MCOs and ACOs Transforming Consumer’s Needs

Both Managed Care Organizations (MCOs) and Accountable Care Organizations (ACOs) have evolved over the years to meet the needs of their consumers. Both organizations have undergone significant transformations, and there are several ways in which they may continue to transform to meet the needs of consumers. MCOs can eventually transform through the integration of technology within mainstream healthcare system as claimed by Harrison et al., (2017). MCOs can adopt telemedicine platforms that enable patients to have virtual consultations with healthcare providers. This can be especially useful in rural areas where patients may not have easy access to healthcare facilities. By providing telemedicine services, MCOs can reach more patients and provide timely care, which can improve patient outcomes. Similarly, ACOs can also transform to meet the needs of consumers.

One way ACOs can transform is through the use of patient-centered care. ACOs can focus on developing patient-centered care models that prioritize patients’ needs and preferences. This can include offering patient education programs, care coordination services, and patient engagement initiatives (Neri et al., 2016) . In summary, Managed Care Organizations and ACOs may transform to meet the needs of consumers by adopting technology, offering personalized care, focusing on patient-centered care models, improving care coordination, and adopting value-based payment models. As the healthcare landscape continues to evolve, it is essential for Managed Care Organizations and ACOs to remain agile and adaptable to meet the needs of their consumers.

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