Guide to Medicare accountable care organization models

Understanding ACO payment models from the Centers for Medicare and Medicaid Services (CMS)

Accountable care organizations (ACOs) have become an important mechanism in US healthcare for achieving some of the top goals of value-based care, including improvements in care coordination, quality of care, and health outcomes. In recent years, a variety of ACO-specific models have been established by The Centers for Medicare & Medicaid Services (CMS) and by commercial payers.

By joining or forming ACOs and participating in these group models, providers gain access to shared resources, guidance and oversight on program performance, and are eligible for bonuses based on the savings they generate and the outcomes they achieve.

In this article, we’ll look closely at the three Medicare ACO-specific models currently offered through CMS to help you understand how they function and how they might benefit you and your practice. For simplicity, we won’t look at other ACO-driven models offered by non-government payers.

What is an accountable care organization (ACO)?

An accountable care organization (ACO) is a group of healthcare providers, including doctors and hospitals, that voluntarily come together to deliver coordinated, high-quality care to a designated population of patients, primarily Medicare beneficiaries.

The goal of ACO healthcare is to improve patient outcomes while managing costs by ensuring that patients receive the right care at the right time, thereby avoiding unnecessary duplication of services. ACOs are incentivized through shared savings programs, where they can earn financial rewards for reducing healthcare costs while maintaining or improving the quality of care.¹

Current ACO models offered by CMS

The most well-known programs are the ACO models offered by CMS. These models include:

• The Medicare Shared Savings Program (MSSP), which encourages coordination among providers to improve the quality and efficiency of care. Participating ACOs receive a share of the savings they generate for Medicare.²
• ACO Primary Care Flex Model (ACO PC Flex Model) is a voluntary model that adds a flexible payment design for primary care delivery under MSSP.³
• Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (REACH) Model, which is typically referred to as ACO REACH, provides purpose-built tools and resources for healthcare providers caring for people under Traditional Medicare, especially in underserved communities.⁴

It’s important to note that ACO membership is a requirement for each of these three models. If you’re evaluating whether or not to join an ACO, read this article.

Medicare Shared Savings Program (MSSP)

The Medicare Shared Savings Program (MSSP) was established by the Centers for Medicare & Medicaid Services (CMS) in 2012 under the Affordable Care Act. The program encourages healthcare providers to form ACOs to deliver coordinated, high-quality care to Medicare beneficiaries.⁵

The program aims to improve patient care while reducing unnecessary costs by incentivizing ACOs to manage healthcare services effectively and efficiently. ACOs that successfully reduce healthcare spending while meeting quality performance standards can share in the savings generated for Medicare, promoting a shift from fee-for-service to value-based care.

How does it work?

• Quality and cost targets: ACOs are tasked with meeting specific quality performance metrics focused on patient outcomes, care coordination, and patient satisfaction.
• Shared savings: If an ACO successfully reduces healthcare costs while meeting or exceeding quality benchmarks, it can share in the savings generated for Medicare. The savings are calculated based on the difference between the expected costs and the actual costs incurred by the ACO.
• Risk models: ACOs can choose different participation tracks that determine their level of financial risk. Some tracks allow for shared savings only, while others involve two-sided risk, where ACOs can incur losses if costs exceed targets.
• Continuous improvement: ACOs are encouraged to continuously improve care delivery and patient outcomes through data analysis, care coordination, and patient engagement strategies.⁶

An accountable care organization (ACO) is a group of healthcare providers, including doctors and hospitals, that voluntarily come together to deliver coordinated, high-quality care to a designated population of patients, primarily Medicare beneficiaries.

ACO Primary Care Flex Model (ACO PC Flex Model)

The ACO Primary Care Flex Model (ACO PC Flex Model) is a new voluntary payment model introduced by the CMS that focuses on enhancing primary care delivery within the Medicare Shared Savings Program (MSSP). The model launched on January 1, 2025, and will run through 2029.⁷

ACO PC Flex aims to test how prospective payments and increased funding for primary care can improve health outcomes, quality of care, and cost efficiency for Medicare beneficiaries. It emphasizes flexibility and innovation in primary care, aligning financial incentives to encourage high-quality care delivery.

How does it work?

• Joint participation: the ACO PC Flex Model allows participating ACOs to jointly engage in both the MSSP and the ACO PC Flex Model, with the goal of reducing program expenditures while improving the overall quality of care for patients.
• Mixed payments: participating ACOs receive a one-time Advanced Shared Savings Payment and monthly prospective payments to support their primary care providers. This funding is designed to help address medical and health-related needs, enabling ACOs to invest in care coordination and quality improvement initiatives.
• In general, this model aims to strengthen primary care services, improve health outcomes for Medicare beneficiaries, and create a sustainable financial model for ACOs participating in the MSSP.⁸

Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (REACH) Model

ACO REACH was launched on January 1, 2023, and will run for four performance years (through December 31, 2026). This model makes important changes to the previous Global and Professional Direct Contracting (GPDC) Model.⁹

ACO REACH was designed to enhance the delivery of healthcare services to Medicare beneficiaries, particularly those from underserved communities. It emphasizes addressing health disparities by encouraging organizations to implement strategies that improve access to care for vulnerable populations. It specifically targets provider-based organizations, allowing them to participate in a model that supports value-based care and incentivizes quality improvement.

The program encourages collaboration among healthcare providers, community organizations, and patients to create a comprehensive approach to care that addresses social determinants of health.

How does it work?

ACO REACH offers flexible payment arrangements, including prospective payments, to support care delivery and incentivize organizations to focus on patient outcomes.

The program currently offers three types of participants:

• Standard ACOs: comprised of organizations with experience serving Original Medicare patients and dually eligible beneficiaries; may have previously participated in another CMS Innovation Center shared savings model.
• New entrant ACOs: ACOs comprised of organizations that have not traditionally provided services to Original Medicare beneficiaries and who may rely primarily on voluntary alignment, at least in the first few performance years of model participation; Claims-based alignment will also be utilized.
• High needs population ACOs: ACOs that serve Original Medicare patients with complex needs, including dually eligible beneficiaries, who are aligned to an ACO through voluntary alignment or claims-based alignment.

There are also two participation options:

• Professional: lower risk-sharing option using Primary Care Capitation Payment, a risk-adjusted monthly payment for primary care services provided by the ACO’s participating providers.
• Global: higher risk-sharing arrangement with two payment options—Primary Capitation Payment (see above) and Total Care Capitation Payment, a risk-adjusted monthly payment for all covered services (including specialty care) provided by the ACO’s participating providers.¹⁰

ACO programs from commercial payers

In addition to these programs offered through CMS, several commercial payers also offer ACO-specific programs as part of their value-based care initiatives, which may include bundled payment programs and other alternative payment models.

It's important to research the specific ACO programs offered by commercial payers in your area, as participation requirements and benefits can differ. Engaging with local payers to understand their ACO programs can help you determine the best fit for your practice, especially if you have a limited number of Medicare patients.

Embracing the shift to value-based care and alternative payment models

Many healthcare practices and providers are finding success by incorporating value-based care programs into their financial models. One way to mitigate the risk of VBC is by joining or forming an ACO and pooling resources and sharing risk among the group. Whether you participate in an ACO or are navigating value-based care on your own, be sure to partner with a healthcare IT provider with the proper technology and expertise to support your VBC journey.

Purpose-built healthcare IT platform for ACOs

athenaOne is built to help medical practices deliver excellent and achieve financial success, whatever mix of payment models they utilize. Our all-in-one solution combines capabilities for electronic health records (EHR), practice and revenue cycle management, and patient engagement in one integrated platform.

Here are some of the features we have designed to help you succeed:

• An interoperable and connected platform that exchanges relevant data with other healthcare systems and solutions and delivers it when and where you need it.
• Population health features and services to help you manage populations of any size across multiple EHRs.
• Clinical decision support, including care gap triggers that are surfaced at the point of care.
• Quality reporting simplifies the reporting process for quality measures, helping you efficiently monitor performance and submit necessary data to either your ACO or to payers and regulatory bodies.
• Support for care coordination enables seamless communication and information sharing that is essential for managing patient care across different settings and improving overall care quality.
• Expertise and customer support and advisory services for value-based care programs, including operational best practices and compliance considerations.

If you’d like to learn more about value-based care and how athenaOne can help you embrace it, read the articles below.