Difference between HMO and ACO

Would you prefer an HMO over an ACO for your healthcare needs? Read on to find out.


In the U.S., an HMO or health maintenance organization is a medical insurance organization that arranges managed healthcare for its members for an annual fee. These HMOs act as middlemen with health care professionals or providers.

Mandated by the Health Maintenance Organization Act of 1973, employers with at least 25 employees who offer traditional healthcare provisions are required by law to offer federally-approved HMO options. HMO covers health care provided by doctors and other health professionals who are legally bound to treat and look after patients in line with its guidelines and restrictions. Emergency care is covered as well.

In HMO, members are required to select a doctor, also known as a primary care physician (PCP) who can direct them to medical services. Physicians, internists, and family doctors are some of the PCPs that a member is required to get a referral from to get additional medical access to a doctor or specialist. These PCPs (or gatekeepers, as they are called) can authorize a referral only if HMO guidelines permit it. HMOs pay PCPs by each service rendered or by the number of managed patients. Members can only get care from a predetermined list of hospitals and doctors.

Over the years, the HMO model has received negative feedback from the public. Cutting down on expenses meant insurance companies could not overspend on treatment, allegedly leading to the practice of choosing patients who are least likely to incur huge medical expenses. HMO also has a seemingly “restrictive” nature as patients cannot choose the healthcare providers themselves, in addition to the fact that providers cannot spend beyond what they are supposed to on a patient in any given circumstance.


Introduced as part of the Patient Protection and Affordable Care Act of 2009, ACO, or accountable care organization, is an organization of health care professionals held responsible for bringing health care to a set number of members. Here, a health care provider is reimbursed payment according to the quality of treatment members receive. Quality metrics are set to measure the services afforded to members.

In ACOs, a PCP is designated to be in charge of the member’s care team and works to make sure the member is getting the right amount of care across the board, regardless of the health provider and care setting. The PCP tracks and keeps records of a member’s care and treatment and shares this information with other health care providers as needed. This limits repeated medical tests, promotes coordinated care, and provides more options for the member.

ACOs are developed to perform locally, which is a critical aspect in managing and monitoring care. Communicating medical records and member information is made seamless and clear because of its local nature.


So, what’s the difference between HMO and ACO?

An HMO is a medical insurance organization that provides health care to anyone who is a  member for a certain annual fee. On the other hand, an ACO is a group of networked healthcare professionals who are supposed to make sure that quality health care is provided to a set number of members.

In an HMO, a primary care physician (PCP) is selected to act as a gatekeeper to other pre-selected health care providers. A member can only get additional access to treatment through a referral from a PCP, a cost-cutting feature HMOs are known for. With ACOs, PCPs are in charge of a member’s care team where the member can choose any health care provider.

Health care providers are reimbursed in relation to quality metrics already in place. It is clear that in an HMO environment, medical cost is a heavy factor, compared to ACOs where the reimbursement system relies on improving medical care.

Comparison chart

A medical insurance organization A group of networked health care professionals
Primary care physician acts as gatekeeper to other pre-selected health care providers PCP in charge of a member’s care team
Members cannot choose health care provider or additional medical treatment Members can choose any health care providers or additional medical services
Medical cost is a deciding factor Improving medical service is prioritized