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Understanding ACO Quality Measurement, Reporting, Benchmarks, & Improvement | Ask Dr. Mingle

In this episode of Ask Dr. Mingle, Dr. Dan Mingle answers six questions from Jason on ACO quality measurement, reporting, benchmarks, and improvement.

Click play below to listen to this episode now:

Question One: Reporting vs. Health Outcomes for ACOs

Jason says: “It appears to me that the grading system for ACOs is primarily based on their reporting, rather than the actual health outcomes of their patients.”

You’ve made an astute observation, Jason. You’re cutting right to the core of the complexity and confusion that is quality measurement.

But, I’d argue with your characterization that ACO quality measurement primarily measures an organization’s reporting aptitude. They’re both in there – real quality and aptitude.

You may be spot on for early, immature, and undeveloped measurement systems. But with time, development, and practice, the actual quality of the outcomes eventually shines through.

I’m unaware of any measurement system that purely measures what it intends to measure. The first hurdle in any measurement system is to develop and implement an effective measurement tool or system. Until that system is uniformly effective, the comparison of measures typically first compares the system’s effectiveness, and then later, as you refine that system and get good at it, it more thoroughly measures and compares the actual outcome.

So, before we can effectively measure health outcomes, we have to measure a cascade of factors that has to exist before the desired health outcome is the primary output.

Let me simplify this by saying there are ten factors that I think collectively make a good health outcome measurement. Only two of those ten factors actually represent great care. A failure of any of them, or a combination of failures, will result in a bad score.

These factors are:

  1. Recognize the eligibility of the patient for the care
  2. Document the eligibility of the patient for the care
  3. Provide that care
  4. Document the provision of that care
  5. Measure the results of the care provided
  6. Document the results – the outcome – of the care provided
    • You can provide excellent care, but it’s hard to report on your outcome if you’re not measuring and documenting the results.
  7. Identify denominators – those patients eligible for the quality measure
  8. Identify the outcome (numerator) status – those patients representing successful performance
  9. Calculate performance metrics for the quality measure
  10. Report performance metrics for the quality measure to CMS

In any one system, improvements in quality filter through to the results.

However, the absolute value of the results and the cross-organizational comparisons still reflect a fair amount of differences in the other measurement and reporting effectiveness measures.

So, it is a complex system. You can fail on the system itself or the measurement itself. But as you improve over time, your comparisons will be on actual performance.

Question Two: Standards Used for ACO Quality Measures

Jason asks: “I’m curious about the specific quality standards used for these measurements. Are there defined benchmarks for metrics like A1C levels and blood pressure such as A1C less than 6.5? And blood pressure less than 120 / 80? Or are the quality standards based on something else entirely?”

Another great question, Jason; you’ve introduced three terms in your questions. Those terms are:

  1. Standards
  2. Benchmarks
  3. Quality Standard

Medicare may use these differently regarding quality measurement than they may be used elsewhere or by others, so I’ll define each of these three terms relative to Medicare quality reporting.


The term “standards” refers to the physiologic number and its meaning. It implies a set of agreed-upon numbers that represent health outcomes.

Measurement, research, judgment, and argument are involved in setting these standards, and some trusted standard-setting organizations generally set them.

There are standards for labeling A1C as normal, diabetes in control, diabetes in poor control, and diabetes out of control. Those standards, according to the Centers for Disease Control (CDC):

  • Below 5.7 is normal
  • 5.7 to 6.5 is prediabetic
  • Above 6.5 is diabetes
  • Up to 7 is good control
  • 9 or above is poor control

A similar scale applies to systolic and diastolic blood pressures. Each pressure, systolic and diastolic, has standards, but they differ a bit by the standards-setting group. Pressures could fall into these categories:

  • Normal
  • Elevated
  • Hypertension
  • Controlled hypertension
  • Malignant hypertension

Quality measurement could involve establishing the average physiologic measurement across your practice – such as “the average blood pressure of my hypertensive patients is 144 / 86.” Or “the average hemoglobin A1C in my diabetic patients is 8.9.”

But that’s not how this works in Medicare’s quality reporting. Medicare chooses to have us count the patients above or below those certain standard levels for each measure.

For hypertension, Medicare wants a count of hypertensive patients with blood pressure under 140 systolic and 90 diastolic. They’re asking you to calculate the percentage of your hypertensive patients in good control. This is typical of most measures where higher numbers mean better performance.

For diabetes, Medicare wants a count of diabetic patients with a hemoglobin A1C above 9. They are asking how many of your diabetic patients are poorly controlled. It’s called an inverse measure, where higher numbers mean worse performance.


When the term “benchmarks” is used by Medicare regarding quality measurement, it describes how your performance rate compares with your peers. It’s Medicare’s standard for turning your performance rate into a quality score.

Benchmarks give the accurate measurement meaning in context.

An example to help you understand benchmarks: If I use a yardstick to measure a board before cutting, I can use that yardstick first to put a mark on my workbench. This “benchmark” allows me to quickly and easily know if what I am measuring is too long, too short, or just right. I don’t need to know the exact number and remember the standard when it is marked on my bench.

Quality Standard

A “quality standard,” in relation to APM Performance Pathway (APP) quality reporting, is the specific benchmark Medicare uses to trigger payment of shared savings or moderation of shared losses.

So, there is a relationship between “standards,” “benchmarks,” and “quality standards.” But there are sometimes subtle gradations of meaning.

To quickly review these terms:

  • “Standards,” in the context of Medicare quality reporting, refers to the translation of science and research into a scale that uses measurement to predict health outcomes.
  • “Benchmarks,” relative to CMS quality reporting, are the translation of clinical standard measurements into a common language that compares the effectiveness of the practice.
  • “Quality Standard,” in this context, refers to the specific benchmark Medicare has set at and above which shared savings are fully shared or shared losses are ameliorated.

Question Three: Grading ACO Quality Performance & Improvement Bonuses

Jason asks: “I’d like to understand how quality performance is graded and determined within ACOs. Is it a straightforward calculation based on the reported data, or are there additional factors taken into consideration? Additionally, it’s intriguing that there is a small built-in bonus for improving quality over the prior year. Could you provide more details on how this bonus is calculated and awarded?”

The process to calculate ACO quality performance may differ based on organizational specifics, but to explain the steps simply:

  • The first challenge of all ACOs is to collect raw data from all the practices. That’s data that identifies the denominator (the patients or visits eligible for each measure) and then the data that defines the numerator (the outcome, usually clinical in its source).
  • Once you have the raw data, you must deduplicate and aggregate patients. When the patient is seen in multiple practices, you must find one measurement – the latest one, usually, for your numerator data.
  • Then, you can calculate quality performance metrics with the data you’ve collected, aggregated, and deduplicated.

The improvement bonuses you’ve mentioned are available when an ACO meets specific criteria.

An ACO can earn a quality improvement bonus by meeting these requirements:

  • This year’s submission has to be complete.
    • For ACOs, a complete submission would include the three APM Performance Pathway (APP) measures or the Web Interface measures (until the Web Interface sunsets in 2025).
  • There has to be an ACO quality score from the prior year.
    • If you didn’t submit for any reason the prior year, you can’t be eligible for an improvement score this year.
  • This year’s aggregate quality score is then compared to last year’s.
    • It’s not on an individual measure base; it’s on that aggregate quality score.
    • Because of this, the Web Interface measure set can be compared against eCQMs, MIPS CQMS, Medicare CQMs, or any combination thereof.
  • It’s calculated as a ratio of the difference in scores divided by last year’s score, and then that result is multiplied by 10% for a maximum 10% improvement score.
    • Only improvement goes into the calculation. If your score dropped and you deprecate over those two years, that doesn’t penalize your score.
  • It can’t be a negative number.
    • You only get an improvement score if you do improve.
  • It can’t drive your total quality score above 100.
    • If you’re already running a perfect score, or near perfect, adding that quality improvement score can’t pull you above a 100 for the category.

ACOs can also gain a bonus through a health equity adjustment that CMS adds to your quality score.

The bonus can be up to 10 points, again capped at 100, so you can’t get above the perfect score.

The bonus points are defined by a Measure Performance Scaler multiplied by an Underserved Multiplier.

The Underserved Multiplier counts the number of patients likely to be in an underserved group. The Measure Performance Scaler groups practices into three performance levels: lowest third, middle third, and upper third of overall performance.

  • ACOs in the upper third get a multiplier of four.
  • Those in the middle third get a multiplier of two.
  • Those in the lowest third get a zero multiplier- which also renders the overall bonus a zero.

The Underserved Multiplier relates to what’s called an Area Deprivation Index. Medicare tracks a ZIP code based index that ranges between one and one hundred, and they set this deprivation index by looking at the census-related factors in each region.

Your ACO’s Underserved Multiplier is defined as a proportion of your assigned beneficiaries in an area with an area deprivation index greater than or equal to 85. This is just looking at the address of each individual and comparing it to that national table of area deprivation indexes. Then, they will count those that are in an area over 85.

Alternately, depending on whichever is a bigger number, they could also count the proportion of beneficiaries you care for who are dually eligible for Medicare and Medicaid or those on the Part D low-income subsidy.

If your Underserved Multiplier is less than 20% – meaning less than 20% of your patients are in those areas with an index of 85 or greater – you don’t get any health equity bonus points and to get that point.

To qualify for the health equity bonus points, you must submit all three APP measures, meet case minimums and the quality standard, and fulfill data completeness requirements.

One more note: this bonus is not applied to the Web Interface reporting method as an incentive to get people moving into the CQM’s of the APM Performance Pathway (APP).

Question Four: ACO Quality Improvement

Jason asks: “Are ACOs obligated to demonstrate year-over-year improvement on the three specified APP measures?”

There’s no overt obligation to improve your score year over year.

You get to collect all of your shared savings if you achieve a winning score. However, an expectation of improvement is built into the process.

Grading is on a sliding scale based on percentile rank of scores. It’s competitive. So, as you and your peers improve the quality of care delivery, that scale changes, and the distribution of scores changes.

As you may remember from one of the previous discussions in this session, the definition of poor control for A1C, for example, will change very slowly. It changes as the standard setting organizations change, and those changes are based on new data. There is a similar dynamic for the other two APP measures – they’ll change slowly with updating care standards.

But where you compare to your peers in those measures will depend on everybody’s performance year after year. So, you will have to improve your score as your peers improve their scores to continue to hit your quality standard. And, of course, when you hit that standard, you collect your earned shared savings.

Question Five: Incentives for ACO Quality Improvement

Jason asks: “Do ACOs receive any incentives or rewards for showcasing improvement on these measures, or are they solely required to report on them?”

There is that small built-in bonus each year for improving quality over the prior year. So yes, as you improve, you get that extra boost in your score. Once you have collected all of your shared savings, an additional boost to your score won’t allow you to collect more.

And despite generating shared savings, you may collect only part or none of the generated savings if there is poor performance.

Since it is a competitive process, performance improvement is required to continue to share in shared savings reliably. So there’s that built-in requirement to show improvement. Also, your score as an ACO is published on Medicare’s Care Compare website, and I urge you to look at it. You can search for your ACO on the site to see your score, but it’s not set up to show year-to-year improvement easily. It doesn’t flag on that page that your score represents an improvement from last year, but anyone who wants to look more deeply into the past can track it over time and see the change.

Question Six: Estimating How Improving Outcomes Might Translate to Increased Shared Savings

Jason asks: “Lastly, is there any way to model or estimate how improving the health of patients across a panel might translate into increased shared savings for an ACO? Understanding the relationship between patient health outcomes and financial incentives could provide valuable insights into the ACO system’s effectiveness.”

Medicare’s Quality Payment Program (QPP) and its alternative payment models are all about paying for value and trying to get away from pure fee-for-service, which we’ve done for decades and decades.

Value is quality divided by cost, so neither solely drives the reward in these programs. If it’s working well and all the systems are aligned – all the factors we discussed in your earlier questions are aligned – higher quality brings higher payment.

The primary driver of financial reward for ACOs is shared savings. So, have you saved money in your ACO year over year?

Medicare has standards for setting the benchmarks in cost. Then, your current year’s cost is compared to that benchmark. If there are savings, if you spent less than was expected, that’s your shared savings, and your contract with Medicare will reflect what percentage of that you stand to gain.

Medicare gets some benefit, and you get some benefit.

Your cost performance sets the maximum value of your payment, but they don’t want you to save money by giving slipshod care. You have to prove some basic level of quality performance to collect any of those savings.

Now, getting to that quality standard, you don’t get more payment as you go above that. That’s limited by how much you generated in your cost savings by providing the care. Your quality performance is necessary to collect the shared savings that you generated.

Now, it may be that the expense of your care went up. If you’re in an Advanced APM and have qualified providers in your ACO, you are subject to losing money if your cost of care is higher than predicted. Your quality performance can ameliorate that but not erase it. You will be subject to your full shared losses if you fall below the quality standard.

Send us your value-based care questions!

If you’d like to ask a question about the APP transition, MIPS, ACO quality reporting, or any other Alternative Payment Model, you can reach out to us in three ways:

You can leave your questions in a YouTube comment under any episode of Ask Dr. Mingle.

On LinkedIn, leave your questions in a comment on any of our posts.

And you can reach out directly by sending an email to

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For many ACOs, the transition to all-patient, all-payer quality reporting is a significant challenge and often feels like an unnecessary burden imposed by CMS. We've created our latest PDF guide to help ACOs orient themselves to the challenge of all-patient, all-payer reporting while finding opportunities to thrive in the future.

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