What is the Difference Between an ACO, IPA and MSO?

January 6, 2022

Accountable care organizations, independent physician associations, and managed services organizations all offer benefits to primary care providers. But what are the differences and how do they impact participation in value-based care?

As value-based care continues to bring major changes to the healthcare landscape, it can be challenging to keep track of all the different models, programs, and contracting opportunities available to primary care providers.

Over the past few years, the Centers for Medicare and Medicaid Services (CMS) has unleashed a slew of new acronyms to mingle with healthcare’s legendary alphabet soup, leaving many practices uncertain about which programs they’re already participating in, which ones they may be eligible for, and how these initiatives will affect their clinical and financial activities.

For independent family physicians and primary care providers, understanding the difference between three major initiatives – accountable care organizations (ACOs), independent physician associations (IPAs), and managed services organizations (MSOs) – is important for making the most out of the opportunities of value-based care.

These programs and models often overlap, but they offer different benefits and require different types of participation from their members.

Here is what you need to know about how these programs can work to improve the delivery of high-quality, lower-cost care.

Accountable Care Organizations (ACOs)

Accountable care organizations, or ACOs, are at the heart of the movement toward value-based care.

CMS launched the Medicare Shared Savings Program (MSSP) in 2012 with the intention of offering financial incentives for providers to improve performance on certain measures of quality, such as preventable hospital utilization or chronic disease management, while holding their spending below specific benchmarks.  The program has undergone several major changes since its inception, but the idea behind ACOs remains the same.

If an ACO successfully meets its quality and spending targets, it could receive a portion of the shared savings, or the difference between what Medicare expects to spend and what Medicare actually spends on care for a predetermined group of attributed Medicare beneficiaries.

Many ACOs choose to start with upside only risk models, meaning that they receive a check for shared savings if they succeed, but are not financially liable to return any money to Medicare if they spend more on delivering care than Medicare expects.

But accountable care organizations have other options, as well. If an ACO is interested in potentially earning a larger proportion of any shared savings, it can accept downside risk, also known as two-sided risk.

In a downside risk model, an ACO that meets its quality and spending benchmarks gets a higher percentage of the shared savings than it would in an upside-only model.  However, if the ACO spends more than Medicare expects, the ACO is required to pay a percentage of those losses back to Medicare.

It’s no surprise that CMS is in favor of expanding participation in downside risk models.  At the end of December 2018, CMS Administrator Seema Verma announced Pathways to Success, the newest iteration of the MSSP, which requires participants to take on increasing levels of downside risk as they move through the program.

Healthcare providers can come together to form an ACO and apply to one of the tracks in the MSSP program, and may be most successful with the help of an ACO enabler.  While many ACOs include a hospital or health system, there is no requirement for a hospital to lead the way. Physician-led ACOs are often among the most successful in saving money for Medicare and allow participants to remain aligned with their strategies and incentives.

How are ACOs different than clinically integrated networks (CINs)?

Clinically integrated networks look similar to ACOs on the surface.  Both are intended to unite groups of providers and support clinical and financial improvements.  CIN members may share health IT tools, clinical quality goals, or financial targets. They may also collectively negotiate contracts with payers.  However, CINs cannot directly participate in the MSSP. Instead, the CIN may decide to form an ACO for its members. The ACO is the entity that enters the MSSP.

Independent Physician Associations (IPAs)

How does a physician-led ACO differ from an independent physician association (IPA)? An IPA, also known as an independent provider association, is primarily a business entity that allows groups of small physician practices to act as a unified whole when making large purchases, advocating for policy changes, or negotiating certain types of reimbursements.

The “strength in numbers” approach can help member practices retain their independence while pooling resources for the purchase and upkeep of new technology platforms or sharing the burden of administrative tasks such as payroll and compliance.

The members of an IPA can also join an ACO.  The IPA may negotiate with the ACO on behalf of its members to secure a beneficial financial arrangement or ensure they get enough support for implementing health IT tools or workflow improvements.

IPA membership and ACO participation are not mutually exclusive.  Neither are they mutually assured. On its own, being a member of an IPA does not mean a practice is participating in the Medicare Shared Savings Program or any other value-based arrangement. And many independent primary care providers are part of an ACO without being members of an IPA.

What about patient-centered medical homes?

The patient-centered medical home (PCMH) model is not primarily a financial or business structure.  Instead, it is a framework for practice transformation that encourages improved access to coordinated, preventive, data-driven care.

While delivering this type of care certainly makes it easier to succeed in financial programs that reward high quality and lower costs, becoming a PCMH does not automatically have any impact on participation in an ACO or any other value-based care program.

Managed Service Organizations

Managed services organizations, or MSOs, also offer valuable assistance to independent providers who may need some extra skills or resources to supplement their staff.  These legal entities are designed to provide administrative support and practice management services to providers.

MSOs are often owned by hospitals or large physician groups that want to centralize their business functions and reduce the costs of duplicate staff and services.  Independent physicians can also band together to launch an MSO that serves all its members. Sometimes, MSOs are standalone companies launched to provide these services to healthcare provider clients across the market.

Some providers will contract with multiple MSOs, each of which offers a defined set of services to the provider. This strategy allows practices to pick and choose the best deals for the specific functions they need.

An MSO may take on any number of critical back-office tasks, including payroll and human resources, coding and billing, patient collections, contract management, or office space management.

They may also assist providers with purchasing supplies and medical equipment, but are not the same as group purchasing organizations (GPOs), which use collective bargaining power across multiple provider organizations to secure better prices for all members.

MSOs may connect providers with electronic health record (EHRs) vendors and manage those technologies and relationships.  MSOs may also supply population health analytics tools or patient engagement solutions.

However, MSOs do not provide services related to quality improvement or clinical care. MSOs are administrative service providers.

As a result, practices still own the responsibility of bridging the gap between accessing a health IT solution and leveraging that solution to produce measurable improvements in care quality and outcomes.

Because they are not quality improvement entities, MSOs are also limited by the fact that they cannot enter the MSSP or other value-based care contracts.  Even if a healthcare provider owns a stake in the MSO company, that practice will still need to join an ACO if it wishes to participate in the Medicare program.

A practice can be participating in one, two, or all three of these initiatives, each bringing its own unique benefits.

Practices may have a greater chance of success when they build upon established best practices and take advantage of opportunities to collaborate with peers – something that all of these models offer in their own way.

Understanding the interplay between ACOs, IPAs, and MSOs is the first step for picking the right combination of healthcare reform activities that will be most effective for a particular primary care practice.