Is CMS going to wreck ACOs with bad math?

CMS reimbursement calculations threaten ACO viability: ©Timon - stock.adobe.com

Aledade and other accountable care organizations are pressing the Centers for Medicare & Medicaid Services to correct what they say is a major misstep in a financial benchmark model that could significantly reduce their earnings and possibly force some practices out of value-based care and discourage others from joining.

The controversy centers on CMS’s Accountable Care Prospective Trend (ACPT), a metric used to project cost growth in the Medicare Shared Savings Program. The metric was meant to provide more stability by forecasting national Medicare cost trends for each year of an ACO’s five-year contract. But CMS’s attempt at setting that number was not only late—it was also dramatically off what really happened in the marketplace.

“We’re 11 months into the first performance period, and they give us a number, and it looks wildly wrong,” says Sean Cavanaugh, chief policy officer, Aledade, and a former CMS official. “In March of 2025 we got the prospective number for 2024. That’s the first big stumbling block—this is actually now a retrospective number.”

Initially, CMS said its 2024 number of 3.6% was accurate. But in March, the agency revised it to 4.9% after pushback from ACOs. The problem is, that new number still doesn’t match what Aledade and others are seeing in the data, which shows Medicare cost growth of 8%.

That gap—4.9% from CMS versus an actual growth rate of around 8%—is 3.1%. With the one-third weighting ACPT receives in the reimbursement formula, that’s a loss of around one percentage point for ACOs. “A reasonably good performing ACO will save 4% to 5%. To lose a full percent of that is to lose 20% to 25% of your shared savings,” he says.

Shared savings are the financial backbone of ACOs, used to fund care managers, data analytics, and quality improvement initiatives. “They're doing this in the expectation that when they beat national or local trends, they'll be rewarded,” says Cavanaugh. “Putting ACOs at risk for CMS estimation errors is not a viable long-term strategy.”

The ACPT applies to new and renewing ACOs—about 109 out of 480 in the MSSP this year, representing 2,461 medical practices. Aledade and the National Association of ACOs have talked to CMS officials and are urging the agency to take action.

The ACPT is currently one-third of the reimbursement calculation for ACOs, and ACOs are requesting it be removed. “The unforeseen circumstances we feel are twofold: one, this number, which in its very name was supposed to be prospective, wasn't finalized until three months after the first performance year. But two—and most important—is despite CMS’s best effort, they got it way wrong.”

CMS has the authority to change the weighting without congressional approval, but thus far has not committed to a fix.

Because the ACPT was a prospective number, it was always expected to have some variance year to year, but the overestimates were supposed to offset the underestimates. However, with the 2025 ACPT set at 4.3%, Cavanaugh says there’s little chance it will offset the 2024 shortfall.

“For us to be made whole, 4.3% would have to be an overestimation by three percentage points,” says Cavanaugh. “If the amount they were under last year was offset by how they were over this year, everybody would be fine. But for them to be over by 3.1%, it would mean it would have to be like 1% Medicare cost growth this year, which CMS is not predicting, we’re not predicting, and I don’t believe anybody is predicting.”

While CMS has listened to their concerns, the administration has not indicated what they may or may not do at this point. Unless CMS acts, Cavanaugh say the integrity of the Shared Savings Program—and the financial foundation for value-based care—could be at risk.

“Introducing another element of risk, which is the number you get from CMS might have no bearing on what's actually happening in the health system in any given year, I think it's going to hurt our collective goal,” says Cavanaugh. “And when I say collective, I mean both the ACO industry and CMS, which just issued a strategic plan where they want to see higher performance from ACOs. I think introducing this level of uncertainty and risk makes it harder to expect better performance, and it makes it harder to recruit. There's a lot of providers who aren't in the Medicare Shared Savings Program, and I think this uncertainty makes it harder to get those folks to join.”