MSSP Shared Savings, Explained Simply

If you have ever heard the term "shared savings" and wondered what it actually means, here is a plain language explanation.

Under traditional Medicare, providers are paid for each service they deliver. A visit, a test, a procedure, each one is billed and paid separately. There is nothing in that payment structure that directly rewards a provider for keeping a patient healthy or for coordinating that patient's care across different doctors and settings. The system pays for volume of services, not for outcomes.

An ACO, or Accountable Care Organization, changes that picture somewhat. An ACO is a group of doctors, hospitals, and other providers who voluntarily come together and take on responsibility for the cost and quality of care for a defined group of Medicare patients. The providers are still paid the normal way for the services they deliver. The ACO structure adds a second layer on top of that, which is what shared savings is about.

Patients do not sign up for an ACO and rarely notice anything different about their care. Instead, CMS looks at where each patient gets the plurality of their primary care and assigns, or "attributes," that patient to the ACO associated with that primary care provider. This attribution happens in the background based on billing patterns.

Once an ACO has its attributed group of patients, CMS sets a target budget for that group each year. That target budget reflects what CMS expects those patients' care to cost, based on historical Medicare spending for comparable patient populations.

At the end of the performance year, CMS looks at what was actually spent on care for the ACO's attributed patients and compares it to that target budget. There are two possible outcomes: spending came in below the target, or spending came in at or above the target. If actual spending comes in below the target, the difference between the target and the actual spending is called the savings. In simple terms, the ACO's patients cost less to care for than CMS expected.

This is where the name "shared savings" comes from. If there were no ACO involved and spending simply came in below what CMS expected, CMS would keep that entire savings for itself. With an ACO in place, CMS instead returns a portion of the savings to the ACO while keeping the rest. That returned portion is the shared savings payment.

Improving patient outcomes is central to the program, not an afterthought. The ACO has to meet CMS quality performance standards, and shared savings are only paid out if the ACO demonstrates that care quality was maintained, not just that spending was lower. Coming in under the spending target is not enough on its own. This is intentional. The program is not designed to reward cutting costs at the expense of patient care.

The goal is to improve health care outcomes and to improve financial outcomes.

It is also worth touching on what happens if spending goes the other way. In an upside-only ACO arrangement with CMS, there is no shared loss, meaning that if spending comes in above the target, nothing is owed back to CMS. When ACOs operate on this “upside only” basis – the typical structure for new or developing ACOs--providers are never financially on the hook if spending happens to exceed the target in a given year. As ACOs mature, shifting to a two-sided risk model may create greater benefits to patients, providers, the ACO, and CMS.

The idea behind all of this is to change the incentive. Primary care is where a patient's health can be most consistently and directly influenced, through preventive care, chronic condition management, and coordination with specialists. Instead of only rewarding the volume of services delivered, the model rewards keeping patients healthy and coordinating their care well, which in turn tends to reduce unnecessary tests, avoidable hospitalizations, and emergency room visits. When that happens and quality standards are met, the ACO shares in the financial benefit of that lower spending.

The results speak for themselves. ACOs in the Shared Savings Program have consistently outperformed comparable physician groups on quality measures, including meaningful year-over-year improvements in blood pressure control, diabetes management, and depression screening with follow-up. Financially, CMS's most recent published results--for Performance Year 2024--show the program saved Medicare 2.5 billion dollars that year relative to benchmarks, the highest annual savings since the program began in 2012.

At Medicare Platform LLC, we have built a trusted data and compliance infrastructure enabling healthcare organizations to deliver value-based care that is compliant, measurable, and financially scalable. We operate as a market-enabling platform, integrating proprietary datasets with advanced analytics to aggregate clinical data, identify cost reduction opportunities, and administer shared savings programs – giving ACOs and providers the tools they need to improve patient outcomes and control costs. In addition to its ACO enablement functions, Medicare Platform supports improvements in quality care and patient outcomes by providing the operational and analytic tools required to manage high-needs and lower-complexity beneficiaries under structured value-based arrangements, allowing physicians to spend time doing what they are trained to do – provide the highest quality care to their patients.

The past shared savings results of Medicare Platform LLC’s supported ACOs give us confidence in our model. In bringing health systems, physician groups, and other health care providers together, we may offer contracting providers a pre-participation payment to fund ACO-related start-up arrangements and in anticipation of participating in the MSSP and achieving shared savings. These pre-participation investments have been approved by CMS as a pathway to protect bona fide ACO investment, start-up, operating, and other expenses. The investments are used by Medicare Platform LLC’s ACOs and participating providers to create infrastructure and care coordination mechanisms, hire new staff, and create incentives for performance-based payment systems. They are crucial to supporting participating providers’ integration into the ACO and its care coordination goals. They fund administrative work, technology, prevention, screening and care coordination in preparation for participation in ACO’s MSSP activities. Compliance is a priority. Medicare Platform’s activities comply with applicable federal laws and regulations governing MSSP participation and ACO formation, including that the requirements relate to pre-participation arrangements between and among potential ACO participants and third parties in the coordination, funding, and management of ACO formation and operations. See Medicare Program; Final Waivers in Connection with the Shared Savings Program.

Medicare Platform LLC supports new and established ACOs and their participating providers, from start-up arrangements and pre-participation funding in connection with the development of an ACO prior to acceptance into the MSSP, through fully operational and mature ACOs continuing to achieve shared savings and improved outcomes for Medicare beneficiaries throughout the country.