In early August, CMS published a proposed rule to overhaul the current Medicare Shared Savings Program (MSSP) for Accountable Care Organizations (ACOs), now in its sixth full performance year.1 The program was created to moderate Medicare spending and improve quality by having providers take greater responsibility for costs and outcomes.2 Currently, the MSSP has 4 tracks. Most ACOs (82%) align along Track 1, a 1-sided risk model where ACOs are allowed to share up to 50% of savings but do not have to share in the costs if they spend above the CMS benchmarks. Tracks 1+, 2, and 3 are 2-sided risk models, requiring ACOs to accept downside risk if they spend more than the CMS benchmarks but offering the opportunity to share in a greater portion of any program savings. 

According to CMS Administrator Seema Verma, after 6 years of experience, the time has come for ACOs to take on additional risk to reduce the cost of care to the delivery system and Medicare beneficiaries. It also appears that MSSP has fallen far short of its goals by spending $384 million between 2013 and 2016, instead of saving the federal government $1.7 billion as projected by the Congressional Budget Office. In its most recent report to Congress, MedPAC acknowledged that 2-sided ACO models appear to save more than 1-sided ACO models.3

The Pathway to Success proposed rule will provide a new direction for MSSP including redesigning the participation options to encourage ACOs to transition to 2-sided risk models; offering only 2 tracks, Basic and Enhanced; implementing strategies to increase savings for Medicare; reducing gaming opportunities; and promoting regulatory flexibility and free-market principles. In addition, it will provide ACOs with new tools to support coordination of care across settings and strengthen beneficiary engagement, ensure rigorous benchmarking, promote interoperable electronic health record technology among ACO providers/suppliers, and improve information sharing on opioid use to combat opioid addiction.

CMS estimates the proposed rule will save the federal government an estimated $2.24 billion over the next 10 years while acknowledging that this proposal will impact MSSP participation. According to a survey by the National Association of ACOs, about 70% of current participating ACOs would likely leave the MSSP due to the 2-sided (down-sided) risk model.4 However, CMS is not as concerned due to the program losses from the 1-sided risk ACO models. The impact of this proposed rule will impact not only the bottom line of MSSP-participating ACOs, but also that of businesses that rely on and support these entities, such as technology and infrastructure firms.

Comments on the proposed rule, to be implemented in 2019, were due October 8. While ACO contracts represent a minority portion of their revenue stream, for many payers ACOs have provided a learning ecosystem to pilot and experiment with new concepts, models, and workflows to reduce costs, optimize patient outcomes, improve the patient experience, and transform the care delivery system. Therefore, because  payers share the sense of urgency for payment and cost improvements and take consistent action to adopt similar payment reforms, organizations may be encouraged to make meaningful changes in their ACO models.

The ACOs that remain in the MSSP will experience increased cost sensitivities and need to work diligently to find opportunities and initiatives to reduce costs. These ACOs will work with their PBMs or pharmacists to adopt drug utilization strategies, leading to increased scrutiny and reduced utilization of branded therapies. Therefore, manufacturers will need real-world evidence demonstrating how their therapies will help ACOs reduce their total cost of care and/or exceed their quality goals, leading to possible increased bonuses and revenue for the ACO. Manufacturers will also find themselves drawn into more value-based and indication-based contracts to share in the risk with ACOs. Therefore, understanding these contract parameters, the goals and objectives of the ACO, and which disease states are most likely to be targeted will help the ACO and manufacturer partner more effectively to address the total cost of care and possibly increase the rate of success for the ACO. In time, CMS will leverage these reforms, along with its incentives for providers, to participate in advanced APMs across multiple payers to contribute to the final MSSP rule and further its payment reform initiatives.


  1. Centers for Medicare & Medicaid Services. Medicare Program; Medicare Shared Savings Program; Accountable Care Organizations—Pathways to Success. 42 CFR Parts 414 and 425. Accessed October 24, 2018.

  2. Kocot SL, White R. Should CMS push ACOs into two-sided risk? Part II. Published July 17, 2018. Accessed October 24, 2018.

  3. Medicare Payment Advisory Commission. Report to the Congress. Medicare and the Health Care Delivery System. Published June 2018. Accessed October 24, 2018.

  4. National Association of ACOs. Press release. Published May 2, 2018. Accessed October 24, 2018.