The ACO Accountability Ratchet

CMS has 53 million Traditional Medicare beneficiaries. Approximately 53 percent of them are attributed to an ACO through MSSP or ACO REACH. The 511 MSSP ACOs generated $5.7 billion in gross savings in 2023, with $2.7 billion returned to Medicare after shared savings payments. ACO REACH generated additional savings. The aggregate numbers are good. The distribution is not uniform.

The organizations generating the most savings are measurably different from those generating none, and the performance gap is widening. ACOs that accepted two-sided risk outperform those that did not. Physician-led ACOs outperform hospital-led ACOs. ACOs with high voluntary attribution outperform those dependent on claims-based assignment. The pattern is consistent enough across years that it is structural rather than incidental. This article maps who is generating savings, what distinguishes them, and what the accountability pressure building into the model design means for the organizations that have been participating without generating results.

The MSSP Performance Distribution

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The 2023 MSSP aggregate performance represented the program’s strongest year since its launch in 2012. Total gross savings reached $5.7 billion across 511 ACOs. Medicare’s net savings after shared savings payments to ACOs were $2.7 billion. Both figures were records.

The aggregate obscures the distribution. The top quartile of MSSP ACOs generated a disproportionate share of those savings. A substantial portion of participating ACOs generated zero net savings. Some generated losses against their benchmarks. The program is carrying a significant volume of participants who are not contributing to Medicare savings and are collecting participation infrastructure investments, data feeds, and CMS operational attention without producing the cost reductions that justify the model’s existence.

The ENHANCED track versus BASIC track split runs through the performance distribution directly. ACOs in the ENHANCED track, which accepts two-sided risk from the first year, generated higher average savings rates per attributed beneficiary than BASIC track ACOs operating under upside-only arrangements. The accountability structure drives the behavior. An ACO facing downside risk has a direct financial incentive to invest in care management, close care gaps, reduce avoidable utilization, and manage high-cost patients. An ACO with only upside potential has an incentive to capture shared savings when they occur but no penalty for failing to generate them. The BASIC track design reflects a policy judgment that gradual migration toward accountability is preferable to requiring two-sided risk immediately. The performance data consistently shows the cost of that gradualism.

The benchmark evolution problem creates a ratchet dynamic that is affecting the program’s long-term participation economics. ACOs that generate savings in one performance year receive a progressively tighter benchmark in subsequent years. The better an ACO performs, the harder it becomes to generate shared savings against a benchmark that is partly derived from its own prior efficiency. This creates a structural penalty for sustained high performance: the ACOs doing the most to reduce Medicare spending face the sharpest reduction in the financial reward for doing so. High-performing ACOs have documented this problem in public comments, and MedPAC has identified it as a participation incentive concern. The response from CMS has been methodological adjustments that modestly reduce the ratchet effect, but the underlying structure remains. ACOs that have been in the program for eight or more years face benchmarks that reflect the efficiency gains they have already produced, and the incremental savings available against those benchmarks are smaller than what new entrants face against higher baseline spending.

Physician-led versus hospital-led performance is the most consistent finding in the published ACO research literature. Studies in Health Affairs, JAMA, and the New England Journal of Medicine spanning from 2015 through 2024 show that physician-led ACOs generate higher savings rates, better quality scores, and more durable participation than hospital-led ACOs. The mechanism is not complicated: hospital revenue interests are structurally in tension with the total cost reduction that ACO performance requires. A hospital that generates 40 percent of its revenue from inpatient admissions has an inherent conflict of interest in an ACO model that rewards reducing admissions. Physician-led ACOs do not carry that conflict. Their revenue base is primarily outpatient, and they gain financially from reducing avoidable inpatient utilization rather than from sustaining it.

Attribution stability is a feature of ACO performance that investor materials and model summaries rarely address but that the performance data shows is materially important. ACOs with high voluntary attribution rates, meaning patients who affirmatively chose the ACO through alignment with a primary care physician rather than being assigned based on claims patterns, consistently outperform ACOs where attribution is largely claims-based. The mechanism is that voluntary attribution reflects an existing primary care relationship, which is the foundational care management infrastructure. An ACO attributed a patient who has no established relationship with any physician in the ACO’s network is managing a beneficiary who has demonstrated no prior engagement with primary care, often the highest-cost population by utilization pattern.

The Named ACO Organization Landscape

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The physician enablement platforms represent the most analytically interesting segment of the ACO market. These are organizations that do not deliver clinical care themselves but that provide the contracting, analytics, care management protocols, and risk management infrastructure that enable independent physician groups to participate in value-based contracts. Their performance reflects whether the ACO model is replicable at scale through an intermediary structure rather than requiring the organizational integration of a Kaiser or a Geisinger.

Privia Health is the physician enablement model that manages ACO contracts on behalf of affiliated independent physician groups. Privia does not employ its physicians; it aligns them through a governance structure in which physician groups become members of Privia’s ACOs and receive the analytical and operational support that ACO participation requires. As of 2024, Privia operated across approximately 30,000 aligned providers in the Mid-Atlantic, Southeast, and Texas markets. Its MSSP ACO performance has been above the national average for physician-led organizations, though Privia’s public financial disclosures focus on total revenue and attributed lives rather than per-ACO savings rates, making precise comparison to other platforms more difficult than investors sometimes represent. The geographic concentration in Texas and the Southeast is strategically significant: these are states with higher baseline Medicare spending per capita, which means the savings opportunity against ACO benchmarks is larger than in lower-spending markets.

agilon health operates a fundamentally different model from Privia. agilon acquires total cost of care capitation risk on its own balance sheet and partners with primary care physician groups to manage that risk. The physician groups remain independent but operate under agilon’s capitation contracts with MA plans. agilon absorbs the financial upside and downside, and the physician groups receive performance-based compensation aligned with cost and quality outcomes. As of 2024, agilon had approximately 500,000 attributed Medicare members across its platform. The model works as long as agilon’s actuarial assumptions about the attributed populations are accurate and the primary care groups it partners with have the care management capability to perform. The 2023 and 2024 financial results showed that agilon, like the MA plans, underestimated utilization normalization post-pandemic and experienced MLR deterioration across its capitated book. The company has been recalibrating its actuarial models and its market expansion pace in response.

Evolent Health operates at the intersection of value-based care infrastructure, specialty care carve-outs, and D-SNP program administration. Evolent’s model is more complex than Privia or agilon because it encompasses multiple revenue streams and contract types. Its oncology care management business, built through the acquisition of NIA and other specialty care management entities, manages specialty utilization within total cost of care contracts. Its health plan services business provides administrative infrastructure for MA plans and D-SNP programs, including Medicaid managed care organizations. Evolent’s financial model involves managing risk on behalf of payers rather than bearing it directly, which creates a fee-for-service-adjacent revenue structure that is more predictable than agilon’s capitation model but less directly aligned with ACO performance outcomes.

Aledade is the technology-enabled physician ACO builder with the most transparent public performance disclosures of any organization operating in this space. Aledade organizes independent primary care physicians into MSSP ACOs and provides the analytics platform, care management protocols, and contracting support that independent practices cannot build themselves. Its 2023 MSSP performance across its ACO portfolio showed aggregate gross savings of approximately $800 million against benchmarks, with net Medicare savings after shared savings payments in the range of $400 million. These figures represent performance across a distributed network of small and medium-sized primary care practices that would individually have no capacity to participate in accountable care. Aledade’s model is the most direct evidence that ACO performance is achievable without health system scale, provided that the analytics and care management infrastructure is supplied through an external platform.

ACO REACH Performance and the Two-Sided Risk Thesis

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ACO REACH replaced the Global and Professional Direct Contracting models in 2023, incorporating two-sided risk from year one, a revised benchmark methodology that reduced the financial advantage that high-spending markets had generated under earlier methodologies, and equity adjustments that modified capitation rates for ACOs serving higher proportions of historically underserved populations. The model attracted participants willing to accept full financial accountability from the start, which self-selects for organizations with genuine care management confidence.

The 2023 and 2024 ACO REACH performance data shows that participating organizations generated higher per-beneficiary savings rates than MSSP ENHANCED track ACOs when measured against benchmark. The difference is partially a selection effect: organizations that entered a two-sided risk model in its first year were expressing a judgment about their own capability that not all MSSP participants share. Disentangling selection from incentive effect in the performance data is methodologically difficult and unresolved in the published literature. What is clear is that the population of ACO REACH participants includes the organizations most confident in their ability to manage total cost, and their aggregate performance validates that confidence.

The participant composition of ACO REACH differs from MSSP in ways that matter. Health systems with employed physician networks represent a larger share of ACO REACH participation than of MSSP. Technology-enabled risk-takers, including platforms that aggregate independent physicians under a common capitation contract, are also more represented. The smaller independent primary care practices that constitute a large share of MSSP participants through Aledade and Privia tend to enter MSSP’s BASIC track first and migrate toward two-sided risk over multiple performance years. ACO REACH does not offer that migration pathway.

The AHEAD-ACO Interaction

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The simultaneous operation of MSSP ACOs and AHEAD global budget hospitals in the same markets creates an attribution conflict that CMS has not fully resolved. The problem is structural: if an MSSP ACO has attributed a beneficiary who is hospitalized at an AHEAD hospital, and that hospitalization is avoided through care management, who receives credit for the savings?

Under the current AHEAD model specifications, hospital savings are measured at the hospital level through the global budget mechanism. Under MSSP, ACO savings are measured through per-beneficiary total cost of care against benchmark. If the same beneficiary’s avoided hospitalization is the source of savings for both the ACO’s benchmark performance and the hospital’s global budget underrun, the savings are being counted in two places against two separate benchmarks. CMS’s proposed handling of this overlap involves adjusting ACO benchmark calculations in AHEAD states to exclude or modify the hospitalization component, but the specific mechanics have not been finalized in the published model specifications as of early 2026. The ACO organizations operating in Maryland, which is the most developed AHEAD state, have flagged this as a material concern in CMS comment processes.

The broader implication is that as AHEAD expands geographically, an increasing share of MSSP-attributed beneficiaries will be in markets where their hospital care is also subject to global budget accountability. The accountability structures will need to be reconciled or ACO participation in AHEAD states will generate declining savings incentives, which would undermine MSSP participation in the markets where AHEAD is most active. MCR-01.08 addresses the AHEAD mechanics and MCR-05.07 addresses the state-level implementation. The ACO-specific consequence is that the accountability ratchet that is already tightening through benchmark evolution will intersect with AHEAD’s global budget structure in ways that could further reduce the financial incentive for ACO participation in the states where both programs operate.

The mandatory model signal coming from the administration, documented in MCR-01.02, suggests that the voluntary participation problem will eventually be addressed through mandatory ACO assignment for Traditional Medicare beneficiaries in markets with mature ACO infrastructure. If that materialized, the performance distribution problem would become more acute: organizations currently in MSSP without generating savings would face mandatory accountability they have been avoiding through voluntary participation choices. The organizations generating savings consistently, including the Aledade network, Privia’s affiliated ACOs, and agilon’s capitated groups, would be relatively unaffected. The ones facing disruption would be the hospital-led ACOs that have used MSSP participation to access shared savings opportunities without building the care management infrastructure that sustained savings require.

Related Reading

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MCR-05_03 ACOs at Scale: The 2025-2026 Participation Surge and What It Signals MCR-05_04 The ACO Financial Playbook: Benchmarks, Risk Tracks, and Mandatory Future Signals MCR-01_07 LEAD and ASM: New Pathways for ACOs and Specialists