Key takeaways
- The Centers for Medicare & Medicaid Services (CMS) aims to align 100 percent of traditional Medicare beneficiaries to an accountable care organization (ACO) by 2030, with more than half (53.4 percent/14.8 million) lives already attributed.
- Over 70 percent of ACOs now participate in two-sided risk models, generating nearly three times the savings per beneficiary compared to upside-only models.
- As ACOs take on greater financial responsibility, it becomes imperative to accurately capture the risk profile of their populations to align benchmarks to the true complexity of care.
- Risk adjustment facilitates fair reimbursement, supporting standardized provider workflows, strengthening compliance, and enabling equitable access.
The shift toward value-based care
CMS has set an ambitious goal: by 2030, every traditional Medicare beneficiary will be aligned with an ACO. Already, 14.8 million lives, over half of traditional Medicare, are attributed to ACOs through the Medicare Shared Savings Program (MSSP) and other Innovation Center models[1].
In 2024, 75 percent of the MSSP ACOs delivered $4.1 billion in shared savings, with $2.5 billion net to Medicare[2]. More than 70 percent are now in a two-sided risk model[3], generating nearly three times[4] the savings of upside-only models[5]; thus, higher financial accountability drives better outcomes. Under the CY 2026 Physician Fee Schedule[6], CMS proposes cutting the maximum time in upside-only tracks from seven to five performance years—meaning MSSP ACOs will face downside exposure sooner, with greater pressure to sustain performance.
CMS is also testing models like ACO REACH[7] and Primary Care Flex[8], which introduce equity adjustments and prospective payments to broaden participation and reduce disparities. These innovations highlight CMS’ intent to balance financial accountability with equity, providing ongoing support for high-needs population amid the shift to value-based care.
Why risk adjustment accuracy matters for ACOs
In value-based care, an ACO’s benchmark determines whether it earns shared savings or incurs losses[9]. These benchmarks are designed to reflect the expected cost of care for a defined population. ACOs can improve performance by raising quality and lowering costs. But without accounting for patient risk, benchmarks may understate the resources required for high-acuity populations, distorting performance results.
To address this, CMS applies prospective Hierarchical Condition Category (HCC) risk scores to recalibrate benchmarks annually. Upward adjustments in prospective HCC risk scores are subject to a cap equal to demographic risk score change from the base year to the performance year (positive or negative), plus 3 percent. Accurate risk adjustment helps verify that ACOs are evaluated fairly, protects their savings and supports ongoing participation as organizations take on greater financial responsibility.
3 reasons why risk adjustment is essential for ACO success
- Fair and accurate reimbursement
Accurate risk capture is important to financial fairness. Benchmarks that fail to account for patient acuity penalize ACOs serving high-risk patients and advantage those with healthier ones. Missed or incomplete coding also leaves CMS-allowed risk score growth untapped. As ACOs transition into two-sided risk under CMS’ Pathways to Success framework[10], such gaps directly threaten financial stability. Strong risk adjustment practices help protect reimbursements, so organizations can confidently take on higher levels of accountability. - Provider engagement and compliance
Risk adjustment shapes the day-to-day workflows of provider networks. ACOs often span independent and employed practices using different electronic medical records (EMRs), leading to variability in documentation and coding practices. CMS requires that diagnoses be submitted within 365 days of the date of service[11]. If conditions are missed, they are excluded from risk scoring, reducing benchmark accuracy. By embedding risk insights into point-of-care workflows, ACOs can help ease provider burden, improve documentation consistency and stay aligned with CMS requirements. Most importantly, accurate risk adjustment also helps mitigate compliance risks by reducing coding errors that could trigger audits and financial penalties. Improving operational efficiency allows clinicians to focus on what matters most: patient care. - Patient equity and access
Risk adjustment is crucial to advancing equity in value-based care. CMS has introduced health equity adjustments[12] under models like ACO REACH, using dual-eligibility and low-income subsidy indicators to provide fair compensation for ACOs serving underserved communities. Accurate capture of patient complexity not only supports equitable funding but also creates a fuller picture of patient needs. This enables ACOs to identify care gaps earlier, target high-risk patients more effectively and design care programs that improve outcomes for populations that need it most.
Bringing it all together
Risk adjustment sits at the intersection of clinical accuracy, operational efficiency, and payment integrity. The primary challenge for ACOs is not only capturing patient complexity accurately but also doing do consistently across fragmented systems and provider types. An end-to-end risk adjustment program encompasses AI-powered risk analytics, digital chart retrieval, provider education, phased coding (restrospective, prospective, concurrent) and MAC submission service. These programs help support ACOs to identify, validate, and submit diagnoses within CMS' 365-day window. Such workflows help reduce variability, strengthen documentaiton consistency, and safeguard organizations from costly audits and financial penalties. It is important that these programs can be tailored to meet the needs of different provider groups, whether large health systems on enterprise EMRs or smaller practices with limited resources, so that every network has a scalable pathway to success. Although the initial adoption of robust risk adjustment programs may require financial commitment, the long-term benefit includes sustained performance, continued savings in downside-risk models, and strengthens compliance as participation in value-based care grows.
Learn how Optum can support your organization's risk adjustment goals and help you navigate the complexities of value-based care at optum.com/risk.
About the author
Pooja Panchamia, senior business analysis consultant for risk and quality solutions, Optum, brings nine years of experience in the health care technology sector, spanning strategy, investments, analytics, and growth. At Optum, she advances go-to-market initiatives for provider and payer organizations, designing strategic risk-adjustment programs, and translating analytics into actionable insights that enable better outcomes across lines of business including Medicare Advantage, Medicaid, and commerical, as well as value-based care models such as MSSP and ACO REACH.
[1] CMS Moves Closer to Accountable Care Goals with 2025 ACO Initiatives | CMS.
[2] fact-sheet-ssp-py24-financial-quality-results.pdf.
[3] Shared Savings Program Fast Facts — As of January 1, 2025.
[4] Based on Optum calculation of the 2024 raw performance data published by CMS.
[5]Performance Year Financial and Quality Results | CMS Data.
[6] Calendar Year (CY) 2026 Medicare Physician Fee Schedule Proposed Rule (CMS-1832-P) Medicare Shared Savings Program Proposals | CMS.
[8] ACO PC Flex (ACO Primary Care Flex) Model | CMS.
[9] Methodology for determining shared savings and losses under the Medicare Shared Savings Program | CMS.
[10] https://www.cms.gov/newsroom/press-releases/cms-finalizes-pathways-success-overhaul-medicares-national-aco-program.
[11] eCFR. 42 CFR 424.44 — Time limits for filing claims.
[12] eCFR. 42 CFR 425.662 — Calculating the health equity adjustment to the historical benchmark.