Which statement describes how ACOs handle performance targets?

• A. ACOs can distribute bonuses when targets are met and impose penalties when targets are missed.
• B. ACOs have no mechanism to pay bonuses.
• C. ACOs always guarantee penalties regardless of performance.
• D. ACOs ignore quality and cost measures.

Answer: (A)

ACOs are designed to be held accountable for both cost and quality. When performance targets are met—costs stay below the benchmark and quality measures meet or exceed thresholds—the organization earns shared savings and can distribute bonuses to participating providers. If targets are missed, the arrangement can lead to penalties or shared losses, meaning money may have to be returned or shared in a way that reduces earnings. This structure creates upside incentives for efficient, high-quality care and downside risk if performance falls short. The other statements don’t fit this approach, since bonuses are indeed possible, penalties aren’t guaranteed in every track, and quality and cost measures are central to how ACOs are compensated.