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r_E = min(max(1 - 0.75 * Q, 0.4), 0.75); g_L = (E - B) / B; SL_E = (g_L >= MLR) * min(r_E * N * (E - B), 0.15 * N * B)
| Inputs | Definition | Unit |
|---|---|---|
Q | Quality score of the ACO calculated under 42 CFR 425.512, entered as a proportion and used as it stands whether the ACO meets the quality performance standard or only the alternative standard; 0 for an ACO that meets neither the quality performance standard nor the alternative standard | proportion, at most 1 |
E | Average per capita Medicare Parts A and B fee-for-service expenditure of the ACO's assigned beneficiaries for the performance year | US dollars per person year |
B | Updated benchmark of the ACO for the performance year per assigned beneficiary person year; above zero | US dollars per person year |
MLR | Share of the benchmark by which spending must exceed it before losses are shared, the positive size of the symmetric MSR/MLR chosen under 42 CFR 425.610(b)(1) | proportion |
N | Assigned beneficiary person years of the ACO for the performance year | person years |
r_E | Share of the excess of spending over the benchmark that the ACO repays, 1 minus 0.75 times its quality score, at least 0.40 and at most 0.75 | proportion |
|---|---|---|
g_L | Per capita spending minus the updated per capita benchmark, as a share of the benchmark | proportion |
SL_E | Amount the ENHANCED ACO must repay CMS for the performance year, at most 15% of total benchmark expenditure and zero below the MLR | US dollars |
Function
Medicare Shared Savings Program annual settlement of an accountable care organisation
Maps an accountable care organisation's per capita benchmark, its assigned beneficiaries' per capita Medicare Parts A and B spending for the performance year and the parameters of its track to the shared savings payment CMS makes to it or the shared losses it repays, as set in 42 CFR 425.605 for the BASIC track and 425.610 for the ENHANCED track. HE-FM-ACO-001 gives the shared savings payment, gated by the minimum savings rate and capped by the performance payment limit, HE-FM-ACO-002 the shared losses of a two-sided BASIC level with its minimum loss rate and loss recoupment limit, and HE-FM-ACO-003 the shared losses of the ENHANCED track, whose loss rate falls as the quality score rises. Each settlement is gated, so the amount jumps from zero once the gap between spending and benchmark reaches the minimum rate and is then shared from the first dollar. This differs from a deductible layer such as the aggregate stop-loss payment HE-FM-ASL-001 (claims above an attachment point, capped at a maximum), the mean and variance of specific stop-loss reimbursement over a claims distribution HE-FM-ATTP-001 or the medical loss ratio rebate HE-FM-ACR-004 (the shortfall of the ratio below the standard times adjusted premium, floored at zero), all continuous in their claims or ratio argument. Only the final min step, a cap on the shared amount, takes the form of HE-FM-ASL-001 with no attachment point. The fee-for-service payments that continue underneath the settlement are not modelled, the per case blend of a fixed amount and a cost share is HE-FM-CTH-001, the margin reading of shared savings as a blend belongs to the blended-payment concept, and the expected profit per member that drives selection, payment minus expected cost, is HE-FM-CSKM-001. Notation follows the Accountable Care Organization article.
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Implementations
Excel
ENHANCED shared loss rate and shared losses in two cells
With named cells QualityScore, Benchmark, Spending, Beneficiaries and MinLossRate, the first formula returns the loss rate in a cell named EnhancedLossRate and the second the amount owed in a cell named SharedLossEnhanced. A blank QualityScore is treated as 0 and gives the 75% rate.
=MIN(MAX(1-0.75*QualityScore,0.4),0.75); =IF((Spending-Benchmark)/Benchmark>=MinLossRate,MIN(EnhancedLossRate*Beneficiaries*(Spending-Benchmark),0.15*Beneficiaries*Benchmark),0)
Assumptions
ENHANCED loss rate rule for performance years from 2024
The rate follows 42 CFR 425.610(f)(4). For an ACO that meets the quality performance standard or the alternative standard, 1 minus the product of 75 percent and its quality score, not above 75% and not below 40%; for one that meets neither, 75%. Earlier performance years used other rules, 1 minus the final sharing rate up to 2020 and a quotient of MIPS Quality points in 2021 and 2022, and are not covered.
ENHANCED loss recoupment limit and adjustments outside the formula
Losses are limited to 15% of the updated benchmark times assigned beneficiary person years (42 CFR 425.610(g) and (l)(2)). The reduction for extreme and uncontrollable circumstances under 425.610(i) and the alternative limit for agreement periods from 2027 with fewer than 5,000 assigned beneficiaries in a benchmark year, 425.610(l)(3), are not included. A loss ratio equal to the MLR counts (425.610(b)(3)).
Worked examples
Illustrative ENHANCED accountable care organisation with a quality score of 70%
With the article's illustrative population (20,000 beneficiaries, benchmark USD 12,000, spending USD 12,360, MLR 2.0%) placed in ENHANCED and a quality score of 70%, the loss rate is 1 minus 0.525, or 0.475. The ACO repays 0.475 of the USD 7.2 million excess, USD 3.42 million, far below the 15% limit of USD 36 million.
Q = 0.7; B = 12000; E = 12360; N = 20000; MLR = 0.02; r_E = 0.475; g_L = 0.03; SL_E = 3420000
Illustrative ENHANCED accountable care organisation at the 40% loss rate floor
With a quality score of 90%, 1 minus 0.675 gives 0.325, below the floor, so the loss rate is 0.40 and the ACO repays USD 2.88 million.
Q = 0.9; B = 12000; E = 12360; N = 20000; MLR = 0.02; r_E = 0.4; g_L = 0.03; SL_E = 2880000
Illustrative ENHANCED accountable care organisation meeting neither quality standard
An ACO that meets neither the quality performance standard nor the alternative standard shares losses at 75%, entered as Q = 0, and repays USD 5.4 million on the same overspend.
Q = 0; B = 12000; E = 12360; N = 20000; MLR = 0.02; r_E = 0.75; g_L = 0.03; SL_E = 5400000
Illustrative ENHANCED accountable care organisation at its loss recoupment limit
With spending 25% above the benchmark at USD 15,000 and the 75% rate, the shared amount would be USD 45 million, above the 15% limit of USD 36 million, so the ACO repays USD 36 million.
Q = 0; B = 12000; E = 15000; N = 20000; MLR = 0.02; r_E = 0.75; g_L = 0.25; SL_E = 36000000
Common errors
Taking the ENHANCED loss rate as 1 minus the 75% sharing rate
The rule multiplies 75% by the quality score before subtracting from 1. Using 1 minus 0.75, or 0.25, for every ACO ignores both the quality score and the 40% floor; with a 70% score it would collect USD 1.8 million instead of USD 3.42 million.
Leaving out the 40% floor on the ENHANCED loss rate
Without the floor a quality score of 90% gives a rate of 0.325 and losses of USD 2.34 million in the article's population, against the USD 2.88 million the 40% floor requires. The floor binds for every score of 0.8 or more (derived).
Sources
ENHANCED track shared loss rate and loss recoupment limit in 42 CFR 425.610
Code of Federal Regulations, Title 42, section 425.610, Calculation of shared savings and losses under the ENHANCED track. eCFR text up to date as of 15 October 2026, last amended 5 November 2025 (90 FR 50019). Paragraph (b)(1) has the ACO choose a zero, symmetrical 0.5 to 2.0% or size-based MSR/MLR, and (b)(3) makes it share losses when spending is above the benchmark by at least the MLR. Paragraph (f)(4) sets, for performance years from 2024, a shared loss rate of 1 minus the product of 75 percent and the quality score, not above 75 percent and not below 40 percent, for an ACO meeting either quality standard, and 75 percent for one meeting neither. Paragraph (g) limits losses to 15 percent of the updated benchmark and (l)(2) computes the limit from per capita benchmark times assigned beneficiary person years; (i) reduces losses for extreme and uncontrollable circumstances after the rate and the limit.
Canonical Identity
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