ACO Cost Drivers: How to Reduce Utilization and Improve Margin

Most ACOs don’t have a cost problem. They have a visibility problem that prevents them from identifying and acting on the real ACO cost drivers.

Benchmarks are fixed. Utilization is not. That is why the best-performing ACOs focus on controlling the behaviors that drive cost, not just reporting them.

ACO cost variation happens every day across post-acute care, ED utilization, and provider decisions. Most organizations don’t see it until months later, when performance is already locked and the opportunity to improve margin has passed.

_{You can’t manage cost after the fact.}

Improving margin in value-based care comes down to identifying your ACO cost drivers, seeing where utilization is happening, understanding who is driving it, and acting before those patterns show up in claims data and financial performance.

Why Cost Control in ACOs Is So Difficult

Reducing cost sounds straightforward: lower unnecessary utilization and improve efficiency.

ACO cost drivers are the specific service lines, provider behaviors, and utilization patterns that create variation against the benchmark. Controlling them is the primary lever for improving shared savings performance in MSSP and other value-based care agreements.

The challenge is turning that insight into action at the provider and patient level.

Cost isn’t driven at the organizational level. It’s driven day to day across providers, care settings, and patient decisions. That’s where variation shows up—and where control is often lost.

A few patterns come up again and again:

• Variation is decentralized: Providers manage similar patients in very different ways, especially in post-acute referrals and ED use.
• Signals come too late: By the time trends show up in claims data, the behavior behind them has already happened.
• Accountability is hard to pin down: Without provider-level visibility, it’s difficult to connect cost back to specific decisions.

Most ACOs aren’t struggling to define the goal. They’re struggling to operationalize it.

From Visibility to Precision: What High-Performing ACOs Actually Track to Control Cost

Precision matters, especially when supported by a population health analytics platform that can surface variation at the provider, service line, and patient level.

_{It’s not about more reporting. It’s about identifying the few patterns that explain most of the cost variation.}

For ACOs managing to MSSP benchmarks, this means moving from aggregate reporting to provider-level and patient-level insights, knowing not just what total cost looks like, but which decisions are creating it and where intervention will have the greatest financial impact.

In practice, that comes down to a few things:

• Cost outliers: Identifying providers, service lines, or patient cohorts that are consistently driving higher-than-expected spend.

• Unwarranted variation: Understanding where similar patients are being managed differently, leading to inconsistent outcomes and cost.

• Leakage patterns: Seeing where care is moving outside of preferred networks or higher-cost settings without a clear clinical reason.

This level of detail changes how organizations operate. Instead of reacting to total cost, teams can focus on the specific drivers behind it—and take action where it will have the greatest impact.

Where ACO Cost is Actually Driven

Knowing where variation exists is only part of the equation.  The next step is understanding where it actually drives cost.

Most ACO costs are driven by a small number of levers with a few service lines accounting for a disproportionate share of total cost. That’s where variation turns into real dollars—and where the biggest opportunities to improve performance exist.

_{You don’t have to boil the ocean. You have to focus on the right levers.}

Two areas consistently rise to the top: post-acute care and emergency department utilization.

Post-Acute Care Utilization

If there’s one place to start when managing ACO cost, it’s post-acute care because small changes here can drive significant savings impact.

This is where most of the variation lives.

Across Medicare populations, skilled nursing facility length of stay averages around 27 to 28 days, according to the CMS, with top-performing ACOs consistently managing below that range.

Within the same ACO, similar patients are often managed very differently. Some are discharged earlier with appropriate support. Others stay longer than necessary or are referred to higher-cost settings without a clear clinical reason.

That variation typically shows up in:

• Length of stay differences across providers and facilities
• Referral patterns into SNFs, LTACs, and IRFs    
• Use of higher-cost settings when lower-cost options may be appropriate

These decisions happen every day—and they add cost directly to the benchmark.

A longer stay. A higher-cost setting. A different referral decision.

Each one has a financial impact. For many ACOs, post-acute care accounts for a significant share of total cost of care, making even small reductions in length of stay or site-of-care decisions materially impactful to margin.

Most ACO scan see total post-acute spend. Fewer can pinpoint what’s driving it at the provider, facility, or patient-cohort level.

• Which providers are consistently sending patients to higher-cost settings
• Which facilities are associated with longer stays
• Where variation exists that isn’t clinically justified

That’s where the opportunity is.

When ACOs can see post-acute utilization at the provider and facility level—supported by integrated care coordination workflows—they can engage physicians with actionable data, standardize referral patterns, and reduce unnecessary variation.

This isn’t about restricting care. It’s about making more consistent, informed decisions at the point where cost is created.

Post-acute care is where the largest cost reduction opportunity typically lives—but it’s not the only one. The second major ACO cost driver operates on a much faster cycle.

Emergency Department Utilization

Emergency department utilization is one of the clearest—and most immediate—drivers of ACO cost, because it creates near-term financial impact and often reflects avoidable site-of-care decisions.

Across MSSP ACOs, the average is roughly 640 ED visits per 1,000 patients², with top-performing organizations operating meaningfully below that level.

The issue isn’t just volume. It’s the type of utilization.

A high number of ED visits that result in discharge is often a signal that those patients could have been treated in a lower-cost setting with stronger access, coordination, or earlier intervention.

That points to a different problem:

• Limited access to primary care
• Gaps in care coordination
• Patients defaulting to the ED when other options aren’t available

These are operational issues—not clinical inevitabilities.

And they show up quickly in cost.

Unlike other areas, ED utilization creates near-immediate financial impact. Each unnecessary visit adds cost that cannot be recovered later in the performance year. At scale, even modest reductions in avoidable ED utilization can translate into millions of dollars in savings against the benchmark³.

Most ACOs can see their ED visit rate. The best performers can break it down in away that drives action:

• Which providers’ patients are using the ED most frequently
• Which patients are repeat utilizers
• What percentage of visits result in discharge vs admission

That level of detail changes the conversation.

It shifts ED utilization from a metric to manage at year-end to a lever that can be influenced in real time—through access improvements, care coordination, and targeted outreach.

Turning Cost Insight Into Action

Seeing cost variation is only valuable if it leads to action. That means connecting analytics to workflows, not just dashboards.

This is where many ACOs still struggle, because they can see the trend, but not always the provider or patient behavior behind it. They have data. They can identify trends. But without clear visibility into which providers are driving those patterns, action remains limited.

Closing that gap is what turns analytics into performance. Small changes here can create outsized savings impact, especially when organizations can intervene early on the highest-cost drivers.

That typically comes down to:

• Timely insight: Visibility early in the performance year to inform actions
• Focused workflows: Care management aligned to high-risk patients and key utilization drivers
• Targeted interventions: Acting on post-acute utilization and ED use
• Clear financial context: Understanding what changes in utilization mean in dollars

This is where the right financial impact analytics makes the difference. Not by adding more data, but by turning cost data into clear intervention opportunities, showing where to act, who to engage, and what will move performance.

High-performing ACOs build this into how they operate. They connect analytics, physician engagement, and care management workflows to execution—and act early while t here is still time to influence outcomes. Because once cost shows up in quarterly results, it’s already locked in.

What ACO leaders should prioritize:

• Post-acute care variation
• Avoidable ED utilization
• Provider-level differences in site-of-care decisions
• Repeat utilizers and high-risk patients
• Workflow alignment between analytics and care management

The Bottom Line

ACO cost drivers are controllable, but only when leader scan see where variation is happening and act before it locks into year-end performance. High-performing ACOs focus on the few utilization patterns that matter most, then connect analytics to care management and operational workflows. That is how they move from reporting cost to reducing it.

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Sources

1. ‍Centers for Medicare & Medicaid Services, Medicare Shared Savings Program Performance Year 2024 Financial and Quality Results Public Use File
2. Centers for Medicare & Medicaid Services, MSSP Performance Year 2024 Financial and Quality Results (ED Utilization Benchmarks) ‍
3. CMS utilization and cost benchmarks; industry estimates of average emergency department visit costs

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