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July 28, 2020

Updated July 2020

According to a 2018 Avalere study, Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP) generated significantly lower savings than estimated made by the Congressional Budget Office (CBO) in 2010 when the program first launched. 

However, in a more recent study from January 2020, researchers found that a higher volume of MSSP ACOs assumed downside risk as the program progressed. Between December 2018 and July 2019, the percentage of ACOs assuming downside-risk jumped from 19 percent to 29 percent, which is attributed to the Pathways to Success final rule.

Currently, the 37 percent of participating ACOs are in downside-risk tracks.

Why are ACOs taking on greater downside-risk?

Over the past few years, CMS modified and created new alternative payment models (APMs) mandating that providers assume downside-risk immediately or after a shorter transition period than previous models. The goal of these new APMs is to reduce Medicare costs by requiring providers to share financial risk with CMS.

Downside-risk refers to the likelihood that an actual financial return will be less than the expected return. In other words, it is the the probability that an investment will decrease in value, resulting in financial losses.

By encouraging or requiring healthcare providers to share in this risk, CMS may be able to mitigate financial losses by splitting financial investment as well as gaining stronger buy-in from participating ACOs.

MSSP ACO performance and cost savings

The MSSP was announced by the Centers for Medicare and Medicaid Services (CMS) in 2010 as an incentive for healthcare providers to work together to improve patient care coordination. Under the Shared Savings Program, both healthcare providers and suppliers can form an ACO. In an ACO, participating organizations share responsibility for the quality, cost, and outcome of care provided to an assigned Medicare fee-for-service population.

According to Definitive Healthcare data, the top 10 MSSP ACOs generated an average of $48.8 million dollars in 2018, and a total combined savings of $488.2 million. This is an increase from the previous year, when the top 10 MSSP ACOs generated an average of $41.8 million and a total of $418.5 million.

Top 10 MSSP ACOs by Generated Savings

Rank Definitive ID ACO Name Patient Population Generated Savings
1. 552157 Palm Beach Accountable Care Organization  77,372 $112,523,299
2. 552116 Hackensack Alliance ACO 38,660 $49,345,826
3. 552185 Beaumont ACO 23,954 $45,138,735
4. 583229 Privia Quality Network LLC 108,224 $43,745,863
5. 274729 Physician Organization of Michigan ACO 77,498 $43,095,103
6. 802274 Millennium Accountable Care Organization 41,803 $41,187,298
7. 800687 Baylor Scott & White Quality Alliance 124,058 $39,298,255
8. 552218 BHS Health System (Closed) 37,998 $38,748,582
9. 552197 Balance ACO 5,451 $37,681,081
10. 552160 Advocate Physician Partners Accountable Care 127,371 $37,495,888

Fig. 1 Data from Definitive Healthcare’s Connected Care database via the ACO search. Generated savings data reflects calendar year 2018 and is sourced from the CMS Shared Savings Program ACO public utilization file. Accessed July 2020.

Changes to the Shared Savings Program

Initially, ACOs participating in the Medicare Shared Savings Program had the option of following one of four different “tracks.” Each track carried different levels of risk sharing for hospitals, with financial earnings directly correlated with the amount of risk taken on by the ACO.

MSSP ACO Tracks

Track 1: ACOs do not take on risk for shared losses if they do not lower Medicare expenditures

Track 1+: ACOs assume limited risk for shared losses

Track 2: ACOs may share in savings (greater than those in Track 1) or repay Medicare losses depending on individual performance

Track 3: May share in generated savings (greatest of any track) or repay losses to Medicare depending on performance

The majority of MSSP ACOs chose Track 1, which does not require participants to repay Medicare for spending above the target budget. From 2012 to 2018, the number of ACOs participating in the shared savings program grew from 27 to 561, exacerbating the issue of overspending without repayment to Medicare. Experts believe that rather than decreasing healthcare spending, as the MSSP was meant to, the program actually increased healthcare-related spending.

Avalere's 2018 study found that actual ACO net savings fell more than $2 billion short of CBO projections between 2013 and 2016. While MSSP ACOs were projected to decrease federal budget expenditures by $1.7 billion, the MSSP actually increased federal spending by more than $380 million from 2013 to 2016--—a difference of over $2 billion. Though overall savings have not met initial expectations, individual ACO performance appears to be improving over time. MSSP ACOs in their fourth performance year showed net savings totaling $152 million, suggesting that participating ACOs require experience in order to produce meaningful savings.

Beginning July 1, 2019, the Shared Savings track selections were limited to “Basic” and “Enhanced” options. The “Basic” track offers five paths—labelled A, B, C, D, and E—with increasing levels of risk and reward.

Learn More

Looking for more information on what true risk-based payments are, and how APMs impact healthcare costs? Watch our on-demand webinar, Measuring Success in Value-Based Care: Strategic Perspectives Across Healthcare.

In this virtual panel, three industry experts discuss the tangible impacts of value-based care (VBC) on both healthcare payers and providers, defining success in VBC, and the key metrics they measure against.


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