Medicare Program Shared Savings Accountable Care Organizations Have Shown Potential for Reducing Spending And Improving Quality

Department of Health and Human Services Office of Inspector General

HHS Announcement


Medicare spending is expected to grow to $1.4 trillion by 2027. To control this increase and promote quality and healthy populations, the Centers for Medicare & Medicaid Services (CMS) has implemented and is considering a number of alternative payment models that reward providers for the quality and value of services. The goal is to incentivize providers to keep patients healthy and thus lower costs. The Medicare Shared Savings Program is one of the largest alternative payment models. As part of this program, health care providers form Accountable Care Organizations (ACOs) to coordinate care to reduce Medicare costs and improve quality of care. Information about the extent to which ACOs are able to reduce Medicare spending and improve quality is critical to inform future developments as ACOs and other alternative payment models evolve.


We analyzed beneficiary and provider data from CMS to describe the characteristics of ACOs. We also analyzed spending and quality data to determine the extent to which ACOs reduced Medicare spending and improved quality in the first 3 years of the program. Lastly, we analyzed spending and utilization data to describe how high-performing ACOs reduced spending and made changes to utilization for key services.


Over the first 3 years of the program, 428 participating Shared Savings Program ACOs served 9.7 million beneficiaries. During that time, most of these ACOs reduced Medicare spending compared to their benchmarks, achieving a net spending reduction of nearly $1 billion. At the same time, ACOs generally improved the quality of care they provided, based on CMS data on quality measures. In the first 3 years, ACOs improved their performance on most (82 percent) of the individual quality measures. ACOs also outperformed fee-for-service providers on most (81 percent) of the quality measures. Further, a small subset of ACOs showed substantial reductions in Medicare spending while providing high-quality care. These high-performing ACOs reduced spending by an average of $673 per beneficiary for key Medicare services during the review period. In contrast, other Shared Savings Program ACOs and the national average for fee-for-service providers showed an increase in per beneficiary spending for key Medicare services.


With any major payment reform, time may be needed for organizations to make changes to improve quality and lower costs. While policy changes may be warranted, ACOs show promise in reducing spending and improving quality. However, additional information about high-performing ACOs would inform the future direction of the Shared Savings Program as well as other alternative payment models.

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