How ACOs Actually Make Money: Shared Savings Mechanics and Where AI Moves the Needle

By Jay Chowdappa, MD, co-founder and CEO, Zynix AI · Updated October 20, 2026

Key takeaways

ACOs make money in the Medicare Shared Savings Program by spending less than a risk-adjusted CMS benchmark for their assigned patients by at least the minimum savings rate, then keeping 40, 50 or 75 percent of the savings, depending on track, if they meet the quality standard. Most of the margin comes from avoided admissions, post-acute care and ED use.

• In performance year 2024, MSSP ACOs earned $4.1 billion in performance payments, yet one in four ACOs earned none.
• Savings count only after they clear the minimum savings rate, which is 2% to 3.9% in the one-sided BASIC levels and chosen by the ACO in two-sided models.
• Quality sets the sharing rate: meeting CMS's quality performance standard, for 2026 a quality score at or above the 40th percentile of MIPS quality scores, earns the track's maximum, which is 75 percent in the ENHANCED track.
• Avoidable admissions, post-acute spending, ED use and specialty leakage are where ACO savings usually come from.
• AI helps when it turns data into worklists and outreach that staff can finish within the performance year.

The Shared Savings Equation Most ACOs Get Wrong

Every ACO leader understands the premise: spend less than your benchmark, hit quality thresholds, keep the difference. Simple in theory. In practice, the Medicare Shared Savings Program (MSSP) paid out $4.1 billion in shared savings in performance year 2024, but one in four participating ACOs still earned no performance payment.

The gap between ACOs that earn and ACOs that bleed isn't strategy decks or population health slogans. It's operational execution at the patient level, thousands of times per day, across fragmented provider networks. And that's exactly where AI is starting to change the math.

How MSSP Shared Savings Actually Work

Let's be precise about the mechanics, because the details matter for understanding where technology creates leverage.

The Benchmark

CMS calculates a per-beneficiary-per-year (PBPY) spending benchmark for each ACO based on historical expenditures, regional averages, and risk adjustment (HCC scores). The benchmark is trended forward and blended with regional spending to limit ratcheting.

The benchmark is not what you spent last year. It's a prospectively set target that CMS believes your population should cost. This is a critical distinction: your benchmark can move against you if regional costs drop or if your risk coding was aggressive in prior years.

The Minimum Savings Rate (MSR)

Before you see a dollar, your actual expenditures must fall below the benchmark by a minimum savings rate. For ACOs in the one-sided levels of the BASIC track (Levels A and B), it ranges from 2% to 3.9% depending on the number of assigned beneficiaries. ACOs in two-sided models, including the ENHANCED track, choose their MSR when they apply: zero, a fixed rate between 0.5% and 2%, or the same variable rate. Miss it by a fraction of a percent, and in most cases you earn nothing.

This binary threshold is where many ACOs leave money on the table. An ACO with 10,000 beneficiaries and a $12,000 PBPY benchmark needs to save roughly $2.4 million just to cross a 2% MSR. Every dollar of avoidable spend that slips through — an unnecessary ED visit, a missed medication reconciliation, a delayed transition of care — erodes that margin.

Quality Gates

Even if you clear the MSR, your shared savings percentage is modulated by quality performance. CMS uses the APP Plus quality measure set (APP is the Alternative Payment Model Performance Pathway), which includes CAHPS survey results, claims-based measures (like all-cause readmissions), and eCQMs. Meeting the quality performance standard earns the track's maximum sharing rate (75% in the ENHANCED track); an ACO that misses it but meets the alternative standard shares at that maximum multiplied by its quality score, and an ACO that meets neither shares in nothing.

For performance year 2026, the quality performance standard is a quality score at or above the 40th percentile of all MIPS quality performance category scores. ACOs that report all five eCQMs or MIPS CQMs can also meet it through a reporting incentive, and ACOs in the first performance year of their first agreement period meet it by reporting completely. The alternative standard is a score at or above the 10th percentile on at least one of the four outcome measures in the APP Plus set.

This means quality isn't a compliance checkbox — it's a direct multiplier on your revenue. A 10-point swing in quality scores on a $5 million savings pool is a $500,000 difference in what hits your bank account.

MSSP tracks and sharing rates in 2026

How much an ACO keeps depends on its track: one-sided ACOs keep up to 40 percent of savings with no downside, and two-sided ACOs keep 50 or 75 percent but owe shared losses when spending runs over. In performance year 2026, 511 ACOs participate in the Shared Savings Program, and 82.8% of them are in Level E of the BASIC track or in the ENHANCED track.

The time an ACO can stay in one-sided risk is getting shorter. In the CY 2026 Physician Fee Schedule final rule, CMS limited an inexperienced ACO to 5 performance years in a one-sided model, instead of 7, for agreement periods beginning on or after January 1, 2027. That makes the operating capacity to manage spending a near-term requirement rather than a later one.

Where the Money Actually Comes From

CMS's performance year 2024 results show where savings come from: ACOs that achieved shared savings had lower utilization than their benchmarks across many categories, including hospital discharges, emergency department visits and skilled nursing facility stays.

When we analyze the spending patterns of high-performing ACOs, the savings cluster in a few predictable categories:

1. Avoidable Inpatient Admissions

Inpatient spending is one of the largest shares of Medicare expenditures for most ACO populations. High-performing ACOs reduce admissions through better chronic disease management, timely transitions of care, and proactive identification of deteriorating patients. Because each admission is expensive, even a modest reduction across a 15,000-life ACO moves total spending.

2. Post-Acute Care Optimization

SNF and home health spending is another major lever. ACOs that actively manage post-acute networks — steering to high-quality, lower-cost SNFs and accelerating home health transitions — can save meaningfully on post-acute spend.

3. ED Diversion and Observation Management

Unnecessary ED utilization adds cost with every treat-and-release encounter. ACOs with robust care navigation programs can reduce avoidable ED visits, but only if they can identify high-utilizer patterns and intervene before the next visit.

4. Specialty and Imaging Leakage

Out-of-network specialty referrals and duplicative imaging erode savings silently. Most ACOs don't even have visibility into referral patterns across their network until claims come back months later.

Where AI Moves the Needle: From Theory to Margin

The categories above are well-known. Every ACO consultant presents them on slide 12 of a strategy deck. The problem is execution at scale — which is where AI creates a fundamentally different operating model.

Predictive Risk Stratification That Actually Works

Legacy risk stratification uses last year's claims data and HCC codes to flag "high-risk" patients. By the time you identify them, they've already been admitted. AI-driven models that integrate current clinical data, ADT feeds, pharmacy data, and social determinants can identify patients trending toward an acute event earlier.

Precision matters: care managers have finite bandwidth, and every false positive wastes hours that could prevent a real admission.

Automated Care Gap Closure

Quality scores directly affect shared savings revenue. But closing care gaps across a distributed provider network — where patients see several different providers and data lives in separate EMRs — is an operational nightmare. Most ACOs rely on manual chart chasing and quarterly gap reports that are stale on arrival.

AI-driven care gap engines process claims, clinical data, and EMR extracts as they arrive to identify open gaps, match them to the correct attributed provider, and trigger automated outreach workflows.

Denial Prevention and Revenue Cycle Tightening

This is the overlooked lever. ACOs don't just need to reduce costs for their attributed population — they need to ensure that the care they do deliver is properly documented and reimbursed. AI-powered denial prevention that catches documentation gaps, coding mismatches, and authorization issues before claim submission recovers revenue that would otherwise leak out through denials and write-offs.

For ACOs in ENHANCED track that face downside risk, this is doubly important: diagnoses that are not documented and coded lower your patients’ risk scores, and with them the risk-adjusted benchmark you have to beat.

Same-Week Network Performance Visibility

Most ACOs discover referral leakage and cost outliers when claims data arrives months later. AI systems that integrate ADT feeds, referral data, and claims as they arrive give ACO leadership same-week visibility into network performance. Which PCPs are referring out-of-network for cardiology? Which SNFs have the highest readmission rates? Which practices have open care gaps trending toward year-end failures?

This operational intelligence transforms ACO management from retrospective reporting to prospective intervention — and that timing difference is often the difference between earning shared savings and missing the MSR by half a percent.

The 72 New MSSP ACOs: Year-One Priorities

CMS announced 72 new ACOs entering MSSP for the 2026 performance year. Based on what we see working across our customer base, here's what separates the ACOs that earn in year one from those that spend three years "building infrastructure":

Priority 1: Data Integration Before Analytics

You cannot optimize what you cannot see. The first 90 days should focus on ingesting claims feeds, establishing ADT connections with major hospitals, and building a unified patient record across your network. Skip the dashboards — focus on the data plumbing.

Priority 2: Risk Stratification on Day 91

By month four, you need a functioning risk model running against your attributed population. Don't wait for perfection. A model that is good enough and running is worth more than a near-perfect model that launches in month 14.

Priority 3: Care Management Workflow Automation

Your care managers are your most expensive and most constrained resource. Every minute they spend on manual outreach scheduling, chart review, or gap report reconciliation is a minute not spent on patient engagement. Automate the workflow orchestration so humans focus on the clinical judgment that actually prevents admissions.

Priority 4: Quality Measurement as a Continuous Process

Don't treat quality reporting as a year-end fire drill. Implement continuous quality measurement that tracks gap closure rates monthly, identifies underperforming practices early, and triggers interventions with enough runway to affect the performance year.

The Bottom Line

ACO shared savings is not a payer innovation exercise. It's an operational engineering problem. The ACOs that consistently earn have built systems that execute thousands of micro-interventions per week: the right patient flagged, the right gap closed, the right referral routed, the right admission prevented.

AI doesn't replace that work. It makes it possible at the scale MSSP demands. More at-risk patients identified and more care gaps closed aren't AI vanity metrics. They're the operational inputs that directly determine whether an ACO clears its MSR and at what quality multiplier.

The math is straightforward. The execution is hard. And the window for the 72 new MSSP entrants to get it right is exactly one performance year.

Frequently asked questions

How do ACOs earn shared savings in MSSP?

CMS sets a benchmark for each ACO from historical spending for its assigned beneficiaries, adjusted for risk and regional trends. If actual spending comes in below the benchmark by at least the minimum savings rate and the ACO meets quality requirements, it shares in the savings: up to 40 percent in BASIC Levels A and B, 50 percent in Levels C through E, and 75 percent in the ENHANCED track.

What is the minimum savings rate for an ACO?

It is the threshold savings must reach, as a percentage of the benchmark, before an ACO can share in them. In the one-sided BASIC levels it varies with the number of assigned beneficiaries, from 3.9% at 5,000 down to 2% at about 60,000 or more. ACOs in two-sided models choose zero, a fixed rate between 0.5% and 2%, or the same variable rate.

How does quality performance affect ACO shared savings?

ACOs that meet CMS's quality performance standard on the APP Plus measure set, in 2026 a score at or above the 40th percentile of MIPS quality scores, share at their track's maximum rate. An ACO that misses the standard but scores at or above the 10th percentile on at least one of the four outcome measures shares at a reduced rate: the maximum multiplied by its quality score. An ACO that meets neither standard is not eligible for shared savings.

Do ACOs have to take downside risk in the Shared Savings Program?

Not at first. ACOs in BASIC Levels A and B share savings without owing losses, while Levels C through E and the ENHANCED track are two-sided. For agreement periods beginning on or after January 1, 2027, CMS limits an inexperienced ACO to 5 performance years in a one-sided model, down from 7, so most ACOs need to be ready to manage losses within their first agreement period.

Where can AI realistically help an ACO earn shared savings?

In the steps that limit savings because staff cannot reach everyone in time: finding recent discharges and reaching patients inside the TCM window, ranking rising-risk patients, working open quality gaps before year-end and keeping referral data current. Agents handle outreach and scheduling, and clinicians keep clinical decisions. Post-discharge TCM for ACOs is a common starting point, and customer stories show how organizations approach it.

Related reading

• AI for Value-Based Care: What It Actually Does
• Post-Discharge Readmission Reduction: How AI Agents Help ACOs Stop Losing Shared Savings
• ACO LEAD Model: Why 2027 Will Reward ACOs That Can Execute Between Visits

Source notes

CMS: Medicare Shared Savings Program Accountable Care Organizations, Updated Performance Year 2024 Financial and Quality Results (fact sheet, September 29, 2025). https://www.cms.gov/files/document/fact-sheet-ssp-py24-financial-quality-results.pdf

CMS: 2026 Medicare Accountable Care Organization Initiatives Participation Highlights (fact sheet, February 4, 2026). https://www.cms.gov/newsroom/fact-sheets/2026-medicare-accountable-care-organization-initiatives-participation-highlights

CMS: Medicare Shared Savings Program, Shared Savings and Losses, Assignment and Quality Performance Standard Methodology Specifications, Version 14 (April 2026). https://www.cms.gov/files/document/medicare-shared-savings-program-shared-savings-losses-assignment-methodology-specifications-version.pdf-0

CMS: Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F), Medicare Shared Savings Program Changes (fact sheet). https://www.cms.gov/newsroom/fact-sheets/calendar-year-cy-2026-medicare-physician-fee-schedule-final-rule-cms-1832-f-medicare-shared-savings

About the author

Jay Chowdappa, MD is co-founder and CEO of Zynix AI. He is a physician, and ACOs led by him generated $300M+ in shared savings before he started Zynix AI to help care teams follow through on what their data already shows.

Zynix AI builds the data and AI infrastructure that ACOs use to operationalize shared savings. If you're entering MSSP or trying to move from BASIC to ENHANCED track, let's talk.