Shared savings contracts provide a critical foundation for Medicaid accountable care organization (ACO) programs. These financial arrangements define how ACO providers can benefit financially if they maintain or improve their patients’ health for lower cost. Calculating an appropriate shared savings approach, thus, is an integral step toward achieving a more accountable approach to care delivery.
This technical assistance brief, made possible by The Commonwealth Fund, draws from the experiences of states that have successfully implemented shared savings arrangements in their Medicaid ACO programs as well as research on how shared savings arrangements operate. It outlines key factors in designing a shared savings ACO approach: (1) minimum population; (2) total cost of care benchmark; (3) truncation of costs/member carve-out; (4) risk transitions; (5) minimum savings loss rates; (6) maximum savings loss rates; and (7) performance limits.