The 2010 Patient Protection and Affordable Care Act included a provision to promote the formation of Accountable Care Organizations (ACOs). These organizations will be eligible to share in the savings to Medicare if they are able to reduce costs and provide high-quality care. The law allows a wide variety of organizations to become ACOs, even networks of providers that are small compared with major integrated delivery networks. The Center for Medicare and Medicaid Services recently proposed regulations, which are extensive and complex. They impose significant regulatory requirements on these new organizations, ranging from the structure of the organization to quality standards for qualifying for any shared savings. There are a number of challenges to ACOs and it is uncertain whether they can achieve the goals Congress had in mind or even whether many healthcare provider organizations will be interested in participating in the program. The potential for shared savings may be too small to justify the additional costs and regulatory burdens of becoming an ACO. In addition, the incentives to physicians may be inadequate to encourage behavior that reduces cost while maintaining quality. The article reviews the proposed regulations and discusses the prospects for success of ACOs.