The Evolution of ACO Partnerships in California

Unique market factors in California are driving interest in commercial accountable care organizations (ACO), according to a study by the Center for Studying Health System Change (HSC) on behalf of the California HealthCare Foundation. (ACOs are groups of providers that take responsibility for the cost and quality of care of a defined patient population.)

In California, large physician organizations are experienced in managing financial risk for patient care. Also, the growing dominance of Kaiser Permanente Health Plans has put more competitive pressure on insurers and providers.

Hospitals, physicians, and other providers are collaborating with public and private TPAs on reforming delivery and payment systems to slow health care spending growth and improve the quality of care. Medicare initiatives to develop ACOs have spurred interest in commercial ACO contracting arrangements among private insurers and providers.

On a national basis, most commercial ACO initiatives focus primarily on new provider payment approaches with existing insurance products. In contrast, California ACO collaborations have combined payment changes with new limited-network ACO insurance products. These limited-network products include financial incentives for enrollees to use ACO providers. They are usually structured as health HMO products that provide access only to ACO providers. Also, PPO products provide reduced patient cost sharing for using ACO providers.

Initial experiences reveals that some significant savings are possible. But ACO efforts require intensive collaboration and investment to support care management and exchange of sensitive performance data. These commitments present challenges even in California communities where market conditions are more favorable for ACOs. For more information, visit

Last Updated 12/01/2021

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