The Medicare Shared Savings Program (MSSP) is a government initiative transforming how healthcare is paid for within Medicare. It functions as a value-based care model, moving away from the traditional fee-for-service structure that reimburses providers based on the quantity of services delivered. The primary goal of the MSSP is to link provider payments to the quality of care and successful patient outcomes, rather than simply the volume of procedures or visits. This program was formally established under Section 3022 of the Patient Protection and Affordable Care Act (ACA). The Centers for Medicare & Medicaid Services (CMS) oversees the MSSP, which aims to improve the health of people with Medicare while also reducing the growth of healthcare expenditures.
The Foundation: Accountable Care Organizations (ACOs)
The operational structure of the MSSP is built around Accountable Care Organizations (ACOs). An ACO is a collective of doctors, hospitals, and other healthcare providers who voluntarily join together to offer coordinated, high-quality care to their assigned Medicare beneficiaries. These organizations commit to being accountable for the overall cost and quality of care for a defined population of Medicare Fee-For-Service patients.
To participate in the MSSP, an ACO must meet several structural requirements, including being a recognized legal entity under state law. A minimum of 5,000 assigned Medicare beneficiaries is required to ensure a population size large enough for reliable measurement of cost and quality. The ACO must also demonstrate processes in place to promote patient engagement, use evidence-based medicine, and coordinate care across different provider types.
This coordinated effort ensures patients, especially those with chronic conditions, receive the right care at the right time, while avoiding unnecessary duplication of services or medical errors. Providers within the ACO streamline communication and care transitions, such as moving a patient from a hospital stay back to their primary care physician. This integrated approach manages the total health of the beneficiary population more effectively.
The Financial Model: Sharing Savings and Risk Tracks
The core financial incentive of the MSSP is the “shared savings” mechanism. CMS first establishes a financial spending benchmark for each ACO, which is a cost target based on the historical Medicare expenditures for the ACO’s assigned beneficiaries. If the ACO’s actual spending for that beneficiary population falls below this benchmark, and the ACO meets all quality requirements, it becomes eligible to share in the difference.
This financial arrangement is structured around different participation options, or “tracks,” which dictate the level of financial risk an ACO assumes. The most basic form is a one-sided risk model, where the ACO is only eligible to share in the savings—known as upside risk. If the ACO’s spending exceeds the benchmark, there is no financial penalty for the losses.
In contrast, the two-sided risk models provide the potential for a higher percentage of shared savings but also require the ACO to take on downside risk. Under this structure, if the ACO’s actual spending is above the benchmark, the organization must pay back a portion of those losses to CMS.
The financial calculations involve adjustments to the benchmark, including factors like the health status or risk scores of the assigned beneficiaries to ensure fair comparisons. The percentage of savings an ACO can keep typically ranges from 40% to 75%, depending on the specific track and the amount of financial risk they agree to assume. The program requires ACOs to demonstrate a minimum level of savings, known as the Minimum Saving Rate (MSR), before any shared savings are distributed.
Measuring Success: Quality Performance Requirements
Achieving shared savings is not solely dependent on reducing costs; it is conditional upon meeting quality and performance standards established by CMS. The MSSP uses quality metrics to ensure that cost reduction does not compromise patient well-being. Poor performance on these measures can significantly reduce or eliminate an ACO’s shared savings payment, even if the organization successfully lowers its spending below the benchmark.
CMS evaluates ACO performance across a broad spectrum of care categories:
- Patient/Caregiver Experience
- Care Coordination/Patient Safety
- Preventative Health
- At-Risk Population Health
ACOs must report on a specific set of measures, and CMS sets a quality performance standard that the ACO must meet to be eligible for the maximum shared savings rate. This quality component reinforces the program’s value-based nature by ensuring that high-quality, patient-centered care is delivered alongside cost efficiency.
What It Means for Medicare Beneficiaries
Participation in the MSSP is intended to improve the healthcare experience for Medicare beneficiaries without restricting their choices. A beneficiary assigned to an MSSP ACO can still choose any doctor or hospital that accepts Medicare, regardless of whether that provider is part of the ACO network. Traditional Medicare benefits, including Parts A and B, remain the same, and beneficiaries do not have to enroll in a new health plan.
The positive outcomes for the patient stem from the ACO’s coordinated care model. Patients benefit from better communication among their different providers, which can reduce the likelihood of conflicting treatments or unnecessary tests. This focus on population health encourages providers to prioritize preventive services and proactive care management to keep patients healthy and out of the hospital.
Some ACOs are permitted to offer incentives to encourage beneficiaries to receive qualifying primary care services. The overall goal is to create a more patient-centered system where the healthcare team is financially rewarded for working together to deliver more thoughtful and effective care. While the patient’s choice of provider is maintained, they may find greater value and better coordination when choosing providers within the ACO network.