The Medicare Shared Savings Program (MSSP), developed by the Centers for Medicare & Medicaid Services (CMS), modifies how healthcare providers are compensated for treating Medicare beneficiaries. This framework shifts away from the traditional volume-based payment system, known as fee-for-service. The MSSP connects provider reimbursement to the value of care delivered, rewarding groups that lower healthcare costs while maintaining or improving patient outcomes. By promoting efficiency and coordinated care, the MSSP aims to ensure the financial sustainability of Medicare and enhance beneficiary health. This structure encourages providers to focus on preventative measures and chronic condition management rather than increasing billed services.
The Core Concept of Accountable Care Organizations
The MSSP operates entirely through Accountable Care Organizations (ACOs). ACOs are groups of hospitals, physicians, and other providers who voluntarily coordinate care for their assigned Medicare fee-for-service patients. These organizations assume responsibility for the overall health and total cost of care for a defined population of beneficiaries. The MSSP was established by Section 3022 of the Affordable Care Act (ACA).
Beneficiary Attribution
A key mechanism is the assignment, or “attribution,” of Medicare beneficiaries to the ACO. This claims-based process determines the specific patients for whom the ACO is financially accountable. Attribution is primarily driven by the pattern of primary care services a patient receives over a look-back period. The algorithm identifies the ACO professional who bills for the plurality of the patient’s primary care services, including codes from physicians, nurse practitioners, physician assistants, and clinical nurse specialists. This assigned population serves as the baseline for calculating the ACO’s financial performance and quality metrics.
Quality Metrics and Performance Evaluation
Reducing spending is not sufficient for an ACO to succeed; organizations must also demonstrate high-quality care. CMS uses standardized quality metrics to evaluate performance across several domains, ensuring financial savings do not compromise patient health. These metrics cover preventative health, patient safety, care coordination, and the patient experience of care.
Clinical Measures
Specific clinical measures include the percentage of patients with diabetes who have their Hemoglobin A1c under control and the rate of appropriate screening for common cancers. Other indicators evaluate the management of hypertension and the implementation of screening for depression with appropriate follow-up plans. Performance is assessed through the APM Performance Pathway (APP) reporting framework, which streamlines data submission. An ACO must achieve a minimum quality score to be eligible for any shared savings payments. Quality scores may be subject to a Health Equity adjustment, providing additional points for ACOs serving underserved or complex patient populations. This evaluation ensures a balance between cost efficiency and clinical effectiveness.
Shared Savings and Risk Tracks
The financial core of the MSSP compares an ACO’s actual spending against a predetermined financial target called the “benchmark.” The benchmark measures the expected per-capita Medicare Parts A and B expenditures for the ACO’s attributed beneficiaries. It is typically calculated using three years of historical spending data prior to the agreement period. This baseline is adjusted using a risk-adjustment methodology to account for the complexity and health status of the patient population.
If the ACO’s actual expenditures fall below this benchmark during the performance year, and the organization meets the required quality standard, it receives a portion of the difference as “shared savings.” If spending exceeds the benchmark, the organization may be responsible for a portion of the overage, depending on the chosen track.
Risk Tracks
The MSSP offers different participation options categorized by the level of financial risk an ACO accepts.
In a One-Sided Risk model, generally intended for newer ACOs, the organization shares in savings but is not responsible for repaying losses if spending exceeds the benchmark. This option limits the maximum shared savings an ACO can receive.
More mature ACOs transition to a Two-Sided Risk model. They are eligible for a higher percentage of shared savings but must also accept responsibility for “shared losses” if spending surpasses the benchmark.
The benchmark calculation is designed to mitigate the “ratchet effect,” which occurs when an ACO’s success lowers its historical spending, making the next benchmark unrealistically low. CMS now incorporates regional spending data into the calculation to prevent successful ACOs from being penalized for their cost-saving achievements.
How MSSP Affects Medicare Beneficiaries
For Medicare beneficiaries, participation in the MSSP is largely passive and does not alter their existing benefits or coverage. Patients are “attributed” to an ACO based on their claims history, but they are not formally enrolled or required to pay membership fees. Beneficiaries retain full freedom to choose any Medicare-participating provider or hospital, regardless of ACO affiliation.
The intended benefit comes from programmatic incentives for better coordination and quality of care. The ACO structure encourages primary care physicians to communicate more effectively with specialists and hospitals. This leads to fewer redundant tests and smoother transitions between different care settings. This focus on coordination and preventative health, such as appropriate screenings and vaccinations, enhances the overall patient experience.
Patients may notice changes like outreach programs focused on chronic disease management or follow-up calls after a hospital stay. The goal is to provide a more holistic and integrated experience, moving away from a fragmented system. The lack of restriction on provider choice is a deliberate feature, distinguishing the MSSP from managed care plans like Medicare Advantage.