In an ACO, what does 'shared savings' mean?

• A. A fixed annual bonus for all providers regardless of performance.
• B. Penalties for cost overruns.
• C. The portion of savings achieved if the ACO meets quality and cost benchmarks, shared with participating providers.
• D. Funds allocated to administrative costs only.

Answer: (C)

Shared savings in an ACO means the portion of cost reductions achieved when total spending comes in below a predetermined benchmark while quality targets are met. The savings are then distributed among participating providers according to the agreed sharing arrangement. It isn’t a fixed bonus and depends on actual performance; if costs aren’t below the benchmark or quality targets aren’t met, there isn’t shared savings (and in some models there can be shared losses). This mechanism specifically rewards efficient, coordinated care that preserves or improves quality, rather than penalties for overruns or funds reserved only for administration.