Accountable Care Organizations (ACOs) are provider groups (typically hospitals and physicians) that agree to be accountable for improving quality and cost outcomes. Payers, including states (Medicaid), Medicare, and insurers as well as provider systems have put enormous resources toward creating a better model than the current fee-for-service model, which does not require coordinated care and is subject to quality problems and medical inflation. Many of these improvement efforts are centered on ACOs.

On March 31, 2011, Health and Human Services (HHS) released the proposed ACO regulations for the Medicare Shared Savings Program (MSSP). The proposal outlines procedures for ACOs to share risk with Medicare and the data that HHS will provide to ACOs. On May 17, 2011, the Centers for Medicare and Medicaid Services (CMS) announced the Pioneer ACO Model, which is intended for a limited number of larger organizations with proven risk sharing experience. Pioneer “sweetens” the MSSP deal in a number of ways, although much of the MSSP structure applies to Pioneer.

This report, commissioned by Premier, Inc., outlines key financial and risk differences between MSSP and Pioneer with financial illustrations.

Neither MSSP nor Pioneer make sense for organizations that assume that Medicare’s current reimbursement levels, trends or structures will persist into the future. Hospitals or physicians that become more efficient only hurt themselves with the current fee-for-service reimbursement. However, if the future brings reduced spending, then shared savings or rewards based on improving quality and reducing cost make more sense—for providers serving commercial and Medicaid patients as well as those serving Medicare beneficiaries. Both MSSP and Pioneer are stepping stones to that future.