Editor’s note: For more from David Muhlestein on the accountable care organization landscape, see his recent post “Accountable Care Growth In 2014: A Look Ahead.”

Active followers of health policy have eagerly awaited the outcome of the early Medicare Accountable Care Organizations, which could indicate how the overall accountable care movement is progressing.  On January 30, the Centers for Medicare and Medicaid Services released preliminary financial data for the first two rounds of the Medicare Shared Savings Program (MSSP) with mixed results.  Of the 114 ACOs in the program, only 54 of the ACOs saved money and only 29 of those saved enough money to receive bonus payments.  While the 54 ACOs that saved money accounted for a net savings of $128 million for Medicare, it’s uncertain if those savings were offset by any losses from the remaining organizations.  Overall, the results were similar to last year’s Pioneer ACO results.

These preliminary results are interesting but are notably incomplete.  There is still much to learn about how individual organizations did, what the overall effect was for the Shared Savings Program and how this will affect the program going forward.  There are, though, some key takeaways that can be garnered from this release.

Current Medicare ACOs

ACOs currently involved in the MSSP are, for the most part, engaged in upside-only contracts with CMS.  Under this model, ACOs share in less savings (50% compared to 60%), but if they lose money they are not required to pay losses back to CMS.  While the CMS release indicates most organizations did not save money, those organizations are not required to repay anything and they have two more years to try to recoup their initial investment.

A likely reason that some ACOs did not realize first year savings is that they spent much of the time establishing the processes that they believe will lead to lower costs.  Many ACOs enter into an ACO contract before they have made all the necessary infrastructural, technological and staffing changes to effectively coordinate care for their population.  ACOs needing to make significant changes, particularly those that had minimal previous experience coordinating care, were most likely to be slow to develop these new competencies which would limit their ability to lower costs.

On a more optimistic note, approximately a quarter of the organizations achieved large enough savings to receive bonus payments from CMS.  While it’s still unclear what these ACOs did differently than those that failed to achieve savings, they do offer strong evidence that achieving savings is possible under the MSSP.


From CMS’ perspective, the early results can be viewed as a generally positive outcome of the program.  While it is unclear whether there were any losses that may have offset the reported savings, CMS reported that the results were “encouraging.”  Spread across the estimated 1.6 million lives covered by these ACOs, savings were approximately $80 per beneficiary.  While this is less than 1% of total spending (based on the average cost per Medicare enrollee), it does add up to a relatively significant sum.  This aggregate saving is a positive sign to CMS as it tries to slow overall cost increases.

In addition to the cost component, CMS is also interested in improving the quality of care that Medicare beneficiaries receive.  The Medicare Pioneer ACOs were shown to have higher than average quality, and if the MSSP ACOs were able to achieve similar quality benchmarks, then CMS could view ACOs having a very positive impact on quality.  If positive cost and quality results can be achieved without providers bearing downside risk, CMS may choose to lengthen the time that ACOs can be in upside-only arrangements to increase the aggregate number of providers involved in the program.


In aggregate, CMS can be happy with the initial results of the program. However, organizations that are considering becoming ACOs don’t think in the aggregate — they reflect on the specifics of their organizations.  Many organizations are currently making preparations to potentially become ACOs, and these initial results are likely to be viewed by them as inconclusive or, more likely, slightly negatively.  These ACOs-in-waiting are looking for proven models that they can emulate before they agree to financial risk; the fact that fewer than half of the MSSP ACOs achieved savings is not a strong indication that the savings are sufficient to offset the implementation costs.

One of the limitations of the data released so far is that no indication is made as to which types of organizations were more likely to lower costs and what those organizations did that helped them achieve those savings.  A hospital system considering becoming an ACO would be more interested in what similarly-sized hospital systems have attained, as opposed to what types of success small physician groups have realized.  As more data becomes available, researchers will begin to understand which approaches to lowering costs are most effective for different types of organizations.  Such research may identify types of organizations that are better positioned to realize the aims of the ACO program.

The Future of the Shared Savings Program

While these initial MSSP results are not a home run for ACOs, they are also not an indication that the program itself is in danger of failing to achieve its goals.  Not all organizations achieved savings, but some did, and they will serve as roadmaps for others to follow.  The over 300 ACOs in the MSSP still have two or three more years before they are all required to bear downside risk, providing them more time to learn how to provide better coordinated care.

Apart from the MSSP, there are also commercial and Medicaid ACOs that are working to achieve these same goals.  The movement of the industry from volume to value will continue; these mixed results are just evidence that there is much work still to be done.