Accountable Care Organisations / Integrated Care Organisations

The development of Accountable Care Organisations (ACO) is the latest organisational change being pushed through by the Government. Ongoing legal challenges have delayed their implementation, but they are still in active development across England and could be in place in April 2019.  We explain what these organisations are and some of the issues surrounding their implementation in the NHS.

Please note that as of February 2018, NHS England now refers to integrated care in place of the phrase accountable care. So Accountable Care System has become Integrated Care System; NHS England wishes to avoid the association that accountable care has with the US healthcare system.


What is an Accountable Care Organisation?

The form of accountable care organisation (ACO) being developed in the NHS can be described as follows:

  • A provider (or a group of providers) will be awarded a contract to provide health and social care to a predetermined population (usually the population of a precise geographical area);  
  • The contract holder takes on the responsibility of providing a range of health and social care services for a fixed budget provided by a commissioner or group of commissioners;
  • The contract specifies outcomes and other objectives that the contract holder is required to achieve within the given budget;
  • An ACO contract will extend over a number of years, usually ten or more.

The idea behind this type of organisation is that it allows for the integration of health and social care for a population and as a result there is an improvement in both the care of the population and the long-term health of the population.  The theory behind ACOs is that if the organisation has a limited budget for a population, this acts as an incentive for the organisation to keep people as healthy as possible to decrease overall use of healthcare services, and to minimise the use of high-cost hospital-based care by ensuring effective community-based provision.

Two key points to note about ACOs are that: an ACO operates under a single contract and the budget is capitated or fixed. These two points distinguish an ACO from an ACS or Accountable Care System, in which the providers have a much looser alliance and no single contract. An ACS, however, is the precursor to an ACO.

How advanced are ACOs in the NHS?

The development of ACOs is an integral part of the 44 sustainability and transformation partnerships (STPs) published at the end of 2016. All the STPs contain plans for organisational changes that could eventually lead to the development of a full-blown ACO. Some areas are more advanced than others.

The most advanced areas are Dudley and Greater Manchester, however development has been delayed in both areas.

In June 2017, NHS England announced eight areas which would become Accountable Care Systems (ACSs), a precursor to ACOs.

  • Frimley Health including Slough, Surrey Heath and Aldershot;
  • South Yorkshire & Bassetlaw, covering Barnsley, Bassetlew, Doncaster, Rotherham, and Sheffield;
  • Nottinghamshire;
  • Blackpool & Fylde Coast with the potential to spread to other parts of the Lancashire and South Cumbria at a later stage;
  • Dorset;
  • Luton, with Milton Keynes and Bedfordshire;
  • Berkshire West, covering Reading, Newbury and Wokingham;
  • Buckinghamshire.

Two other areas, West, North and East Cumbria, and Northumberland, are also heading to ACS development.  In future, Surrey Heartlands could also have a devolution setup similar to Greater Manchester and be given financial autonomy in return for ACO development.

Outside of these areas named by NHS England, developments are ongoing on new care models that increase integration. The two main approaches, Multispecialty Community Providers (MCPs) and Primary and Acute Care Systems (PACS), are also precursors to the development of ACOs in the NHS.

Both MCPs and PACS integrate primary, community, mental health and social care, but a PACS also includes most hospital services. These models have been developed by NHS England since 2014 in nine PACS and 14 MCP vanguard areas, but are now being rolled out in numerous other areas under the STPs.

In February 2018, NHS England planning guidance included that all STPs will become ACSs, or using NHS England's new terminology, Local Care Systems (LCSs). The planning guidance focuses on LCSs and not ACOs, which are subject to two legal cases.


In order for an ACO to be put in place a new contract needs to be available for the commissioners to use. In August 2017, a draft ACO contract was published; this will allow Clinical Commissioning Groups (CCGs) to choose to commission ACOs in their areas.

This publication was followed by a two month consultation on the draft contract. It became clear that before the contract could be used, secondary legislation would be needed to amend the Health and Social Care Act 2012.

At the start of January 2018, the secondary legislation needed was expected to be put in place in February 2018 thereby allowing the first ACOs to start in April 2018. However, in January 2018 Sarah Wollaston MP chair of the Commons Health Committee wrote to Jeremy Hunt asking that any moves to implement ACOs be paused pending further consultation. Prior to this legal challenges to the setting up of ACOs had been filed (see below). Both the letter and the legal challenges have resulted in a delay to the legislation that will allow ACOs. 

In late January 2018, Jeremy Hunt wrote to the chair of the Commons Health Committee saying that the ACO contract implementation would be paused allowing for more consultation. NHS England has been forced to conduct further public consultation work on the ACO contract.

Legal Challenges

Two legal challenges against the establishment of ACOs have begun.

999 Call for the NHS

The campaign group 999 Call for the NHS, backed by law firm Leigh Day, lodged a judicial review in October 2017. This claims that the contract for accountable care organisations breaches the Health and Social Care Act 2012.

The papers claim that the formation of SCOs breaches section 115 and 116 of the 2012 Act, which relate to the price a commissioner pays for NHS services and regulations around the national tariff.

The campaigners’ case argues that under current legislation, prices paid for NHS services must reflect how many patients receive the care under that specific service, whereas the ACO contract allows commissioners to give providers a fixed budget for the population in the area.

The judicial review was given permission to proceed in late December 2017 and will be heard 24 April 2018.


The second application for a judicial review was lodged on 11 December 2017 by Dr Graham Winyard, Dr Colin Hutchinson, Allyson Pollock and Sue Richards, and Professor Stephen Hawking, under the campaign name JR4NHS.

The academics are  working with Harrison Grant Solicitors and Nigel Pleming QC to argue that introducing new commercial, non-NHS bodies (ACOs) to run health and social care services without proper public consultation and without full Parliamentary scrutiny would be unlawful. They argue that the consultation procedure around the ACO contract was insufficient.

Major criticisms of ACOs


Much of the criticism of ACO development hinges on the potential for large-scale involvement of private sector in the NHS.

Under the draft ACO contract commissioners can tender for a provider under open competition rules; it is, therefore possible for a private company to bid for and win the contract. This means that it is theoretically possible for a multibillion pound contract lasting for ten years or more to be handed to a private company.

At present there are no safeguards to prevent private companies winning these huge contracts.

It should also be noted that the ACO contract holder is not required to provide all the services in the contract, but can sub-contract to many other providers, including private companies.


ACOs operate with a capitated or fixed annual budget that allows the providers to retain and share any savings made.

This type of approach has led to concerns that services will be rationed either because the budget provided is just not enough to provide all universal healthcare services or, and this is particularly pertinent if the contract holder is a private company, to produce savings to increase the amount of budget that the providers can retain.