Background

The Medicare Shared Savings Program (MSSP) is a permanent accountable care organization (ACO) program run through the Centers for Medicare and Medicaid Services (CMS). It was created in 2012 through the Affordable Care Act. The program allows groups of providers to form accountable care entities that are responsible for delivering coordinated, high-quality care while collectively reducing overall costs for Medicare beneficiaries across the full range of patient acuity.

In parallel, the Centers for Medicare and Medicaid Innovation (CMMI) has developed and tested concurrent ACO model demonstrations to encourage provider participation and maximize savings while testing various payment and care delivery modalities that operate outside the bounds of the traditional Medicare program. The ACO Realizing Equity, Access, and Community Health (REACH) model is the most recent iteration of an advanced ACO model, which was launched by the Biden administration in 2023 as a re-imagined version of the Trump administration’s Direct Contracting Model. The model is scheduled to run through 2026 and offers three types of participation: Standard (entities with fee-for-service [FFS] Medicare experience), New Entrant (entities with no FFS Medicare experience), and High Needs (entities focused on complex patient populations). Unlike MSSP, which offers a maximum 75% risk sharing arrangement, the ACO REACH model is the first to offer a global-risk track (100%) to its participants and provides waiver flexibilities such as those related to skilled nursing facility admissions, home visits, and telehealth that are not available in MSSP.

Novel Focus on High Needs

The Direct Contracting (now ACO REACH) model was the first CMMI model to include a track dedicated to high-needs Medicare beneficiaries, garnering significant interest from provider participants, investors, and policymakers. Eligibility for a High Needs ACO (HNACO) is based on beneficiaries having complex needs (e.g., one or more chronic conditions that impact mobility), reflected by a high-risk score, unplanned hospital admissions, signs of frailty, or at least 90 Medicare days of home health or 45 days in a skilled nursing facility.

The HNACO track has several distinct and novel features related to size, risk model, benchmarking, and waivers. HNACOs are only required to have a minimum of 1,200 attributed beneficiaries, whereas Standard and New Entrant–as well as MSSP–ACOs have a 5,000-benficiary minimum in 2025. ACO REACH also offers differential benchmark methodologies to HNACOs that consider the increased costs of high-needs patients, such as a concurrent risk model to capture abrupt declines in health and unique quality metrics more aligned to their patient population. In the most recent data from performance year 2023, HNACOs were the top performers, consistently achieving better savings rates and savings per beneficiary than Standard and New-Entrant REACH ACOs (Figure 1). On average, the top five performers in ACO REACH by earned savings–all HNACOs–earned over nine times the average program savings per beneficiary with 90% fewer assigned beneficiaries.

Figure 1: REACH ACOs with Largest Savings per Beneficiary and their Size vs. Program Average, 2023

ACO REACH is set to end in 2026, and an extension or successor model has not been announced. In the absence of a new model or dedicated high-needs track in other models (see Appendix), Avalere Health provides an evidence-based perspective on how HNACOs might perform should they be required to transition to the permanent MSSP model at the end of the performance period.

Methods

After observing that HNACOs consistently ranked as top performers in ACO REACH, we hypothesized that ACOs focusing on high-complexity and high-cost patients are likely to perform strongly in MSSP as well. We analyzed the most recent publicly available data from performance year 2023 for ACO REACH and MSSP models, identifying the top five performers for each program by earned net savings per beneficiary (Table 1). The analysis focused on determining whether there were any similar characteristics between the HNACOs in REACH and the highest performing MSSP ACOs, considering factors such as patient demographics, clinical model, historical benchmark, and savings achieved. While there are differences in the models (as noted above) that prevent a direct comparison of savings achieved, there are observed directional trends between them that provide support for positive future performance opportunities.

Table 1: HNACOs and MSSP ACOs with the Highest Earned Savings Per Beneficiary and Their Beneficiary Demographics, 2023

*While the percentage of dual-eligible beneficiaries and beneficiaries who were 85 years and older is not available in the ACO REACH data, the status of the top five performers as HNACOs indicates the complexity and fragility of their patient populations. Dual eligibility and elderly status are used as proxies in the MSSP program to draw parallels to HNACOs in the absence of formal designations.

ESPB: Earned savings per beneficiary; PBPM: Per beneficiary per month

Findings:

Patient Demographics

Avalere Health’s analysis concluded that in 2023, the top five MSSP ACOs, ranked by savings per beneficiary, were similar in several ways to HNACOs in the ACO REACH program. The top MSSP performers had a higher-than-average number of complex beneficiaries, including those dually eligible for Medicare and Medicaid (five times higher) and elderly beneficiaries aged 85+ (three times higher) (Figure 2).

Figure 2: Top MSSP Performers vs. Program Average Share of Beneficiaries Who Were Dual Eligibles or Aged 85+, 2023

Care Model

Primary care is associated with improved health outcomes and reduced overall healthcare costs; unsurprisingly, the top-performing MSSP ACOs had greater primary care physician (PCP) service utilization among their beneficiaries compared to the MSSP average (2.5 times higher) (Figure 3).

Figure 3: Top MSSP Performers vs. Program Average Use of Primary Care Services, 2023

By contrast, post-acute care (PAC) use–particularly in the skilled nursing facility (SNF) setting–has historically been considered a high-cost, low-value target for generating savings in MSSP and other VBC programs. However, a growing body of research is recognizing the vital role of post-acute care, particularly for frail, elderly adults. This recognition that post-acute care can drive quality improvement and savings (especially for higher-acuity patients) is validated in recent performance data: top-performing ACOs had three times greater proportion of PAC use–which includes hospice, home health, and SNF–compared to the MSSP average (Figure 4).

Figure 4: Top MSSP Performers vs. Program Average, Proportion of Total Spending in PAC Settings, 2023

“Total hospital” includes inpatient and outpatient hospital settings; total PAC includes home health, hospice, and SNF

Benchmark

The combination of these factors–beneficiaries with complex needs and an ACO’s high-touch clinical model to address those needs—contributes to a higher-than-average historical benchmark per capita for the top performing MSSP ACOs (three times higher than the program average). When an ACO’s benchmark for the total cost of care is higher, there are more opportunities to identify efficiencies, reduce costs, and ultimately improve financial performance through shared savings.

Discussion and Considerations

Based on the assessment of publicly available performance and utilization data from MSSP for 2023, HNACOs are well-positioned to succeed in MSSP should a transition to the program be necessary. They have similar high-needs patient populations and high-touch clinical models, which both contribute to an elevated historical benchmark with significant opportunity for cost savings.

A qualitative review further confirms that HNACOs and high-performing MSSP ACOs share a common mission and focus on patient-centered care and quality of life, which may not be reflected in publicly available performance data. This includes initiatives such as home-based primary care and end of life care, offered by Bloom Health Network and Nevada Care Connect in ACO REACH and Bluestone ACO and USMM Accountable Care Partners in MSSP.

While HNACOs have the potential to succeed in MSSP, participants should carefully consider key differences in the programs (outlined above). The prospective risk adjustment model in MSSP compared to the concurrent risk model in HNACO REACH may be less responsive to increasing patient acuity, and the 75% financial risk sharing arrangement ceiling could limit upside potential for more advanced ACOs used to taking 100% risk. At the same time, it could also reduce the downside risk in the event of losses and offer more predictable revenue. Additionally, with the higher beneficiary minimum, ensuring consistent and effective care management will be essential to maintain positive health outcomes for high-needs patients and generate savings for the ACO.

As policymakers consider which models should continue under the new administration, models that generate significant savings to Medicare while improving the quality of care for vulnerable patients – like the HNACO track in ACO REACH – are strong candidates for national expansion or incorporation into MSSP. In fact, in the 2025 Medicare Physician Fee Schedule final rule, CMS sought feedback on incorporating a 100% risk track into MSSP after it is tested in CMMI. Providers, investors, and other VBC stakeholders should continue to monitor the environment to identify emerging opportunities for businesses operating in the high-needs segment of the market.

Appendix: Timeline of Possible Outcomes When ACO REACH Ends