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16 April 2018updated 09 Sep 2021 4:29pm

What are Accountable Care Organisations (ACOs)?

ACOs have caused a major stir, but what actually are they, and how will they affect the NHS?

By Anna Charles

Constraints on NHS funding and rising demand from a growing and ageing population have put the NHS under enormous pressure. The response requires the NHS to work differently by breaking down barriers between services, to integrate care around people’s needs and to place greater emphasis on the prevention of ill health.

Developments in integrated care are taking different forms. A variety of terms are used to describe these arrangements and they are often used interchangeably, leading to confusion. Integrated care systems (ICSs), previously known as accountable care systems, bring local NHS organisations and local authorities together to plan and commission care for their populations and provide overall system leadership. 

They evolved from sustainability and transformation partnerships (STPs), which were introduced across the country in 2016, but are more advanced in their ability to work collaboratively and are given more freedom by the NHS to decide how they manage resources. At the same time, groups of providers of NHS services are also coming together in many areas to integrate the way that care is delivered. This may include hospitals, community services, mental health services and GPs, as well as social care and independent and third-sector providers in some cases. We refer to these as integrated care partnerships, and the areas they cover are usually smaller than those covered by an ICS. 

Accountable care organisations (ACOs) are a more formal version of integrated care partnerships that could be established when commissioners award a long-term contract to a single organisation to provide a range of health and care services to a defined population following a competitive procurement. NHS England is developing a new contract to be used by commissioners wishing to go down this route, but ACOs do not yet exist in practice. Nevertheless, these developments have been met with some concern and prompted two separate legal challenges. 

Why are ACOs so controversial? 

Two key factors have driven these concerns. The first is that the language of accountable care originates in the United States, raising concerns that ACOs signal a move to an “American-style system”. But these concerns are largely unfounded. The aspect of ACOs that has been adopted from the US is the idea of holding providers to account for improving outcomes for a defined population. Other elements, such as who pays for care and delivers it, would not be copied from the US. The principles of a universal health system, funded through taxation and available on the basis of need to pay, wouldn’t be affected.

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The second factor is that the proposed contract would involve the use of competitive procurement, raising concerns that this would allow private companies to compete to deliver NHS care. In practice, public-sector providers are more likely to be awarded these contracts, as a successful bidder would need to demonstrate that they have the capability and experience to deliver a wide range of NHS services, and that other local providers – including GPs – are willing to work with them. The area furthest ahead in its plans to use the contract, Dudley, has identified two NHS trusts as the preferred providers. However, these arguments offer little reassurance to those who doubt the capability of commissioners to manage procurements of this nature or the motivations of some providers. 

In response, NHS England has decided to delay the use of the proposed ACO contract, and this offers an opportunity to listen to the concerns of campaigners and communicate why the contract is needed. At The King’s Fund we have argued that much more needs to be done to explain what the contract would add to existing ways of integrating care and, indeed, whether it is needed at this stage in the development of integrated care.

Progress in integrated care systems

Ten areas have been selected by NHS England to lead the development of integrated care systems and they have been working to put in place the structures that are needed for an ICS to work. For example, they are forming boards, appointing leaders to oversee their systems, and making agreements to share money and responsibility for performance. They’ve also been working to change and improve how care is delivered, for example by introducing multi-professional community teams to support older people in the community and avoid unwanted hospital admissions.

Recent guidance from the national bodies makes clear that ICSs will become increasingly important in planning services and managing resources in the future. The areas that are operating in this way will be given increasing freedom over how they manage their resources, and other systems will soon be joining the programme if they can demonstrate their readiness to do so. 

What does all this mean for the future of the health system?

This represents a different way of working for the NHS with an emphasis on places, populations and systems rather than organisations. It marks a shift away from policies that have encouraged competition and towards an approach that relies on collaboration between the different organisations delivering and paying for care.

Working in this way is not easy in the context of the Health and Social Care Act 2012, which was primarily designed to promote competition. Changes in legislation will be needed to bring the statutory framework into line with the priority being given to integrated care, but there is no prospect of this happening in the short term because the government lacks a working majority and Brexit is dominating the timetable. 

Integrated care is not a panacea and national and local leaders will need to be realistic about the time it will take for these developments to deliver results. They will not remove the significant operational and funding pressures facing the health and care system in the short term. However, The King’s Fund believes the development of integrated care systems should be supported, as they offer the best hope for the NHS and its partners to provide the integrated health and care services required to meet the needs of the growing and ageing population now and in the future.

Anna Charles is senior policy adviser at the King’s Fund. 

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