In 2025, Medicare Accountable Care Organizations (ACOs) encountered a complex landscape shaped by significant headwinds and new opportunities. They saw persistent challenges from rising costs of care and ongoing regulatory uncertainty. Workforce shortages, particularly in primary care, and the continued integration of new risk adjustment models also added operational strain. However, CMS expanded its support for risk-based models, broadened adoption of digital health tools, and increased alignment of incentives across payers, all of which encouraged innovation and care coordination.
As 2025 draws to a close, we are working with our ACO clients as they face new challenges and opportunities. Here are five key issues Milliman’s experts are monitoring heading into 2026 that are likely to shape ACO strategy and performance.
Emerging regulatory and economic issues for ACOs to watch in 2026
1. The future of ACO REACH: What comes next?
With the ACO REACH model nearing its scheduled conclusion at the end of 2026, the industry is closely watching for CMS’s next steps. Will there be a successor model, and if so, what features will it retain or revise? Will there be related program offshoots (e.g., a geographic component)? The prospect of a new program brings both uncertainty and opportunity for ACOs, especially those that have invested in advanced risk and care coordination initiatives under REACH. Staying agile and preparing for transition will be critical as details emerge.
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2. Persistently high Medicare FFS trends: A growing challenge
Medicare Fee-For-Service (FFS) expenditure trends have remained stubbornly high, putting pressure on ACOs, whose benchmark targets have a prospectively determined component. When CMS’s prospective trend estimates differ materially from actual trends, it becomes more difficult for organizations to demonstrate savings. Sophisticated financial modeling and advocacy for more responsive benchmarks are becoming increasingly important.
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3. Impact of skin substitutes on performance
The use of skin substitutes has been a notable driver of cost and variation in ACO performance, but recent changes in the Physician Fee Schedule may help mitigate this issue. Part B spending for these products rose from $252 million in 2019 to over $10 billion in 2024, and CMS forecasted that the cost would rise above $20 billion dollars by 2026 without intervention.1 However, starting in 2026, CMS will reimburse facilities and physicians at a flat national rate of $127.28 per square centimeter for covered skin substitute products that are not biologicals licensed under Section 351 of the Public Health Service Act.2 By refining this policy, CMS aims to standardize reimbursement for chronic wound treatments and align incentives more closely with value. It will be essential for ACOs to monitor the impact of these changes on clinical outcomes and financial results in 2026.
4. New payment models: TEAM, ASM, and more
New mandatory CMS payment models were introduced in 2025, such as TEAM (Transforming Episode Accountability Model) and ASM (Ambulatory Surgical Model), offering fresh opportunities and challenges for ACOs in the selected regions. Understanding the structure, attribution, and risk-sharing elements of these programs will be key to strategic planning for these mandatory models.
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5. The challenge of sustaining success in mature programs
As ACOs mature, their historical performance sets a higher bar for future success. Achieving savings year after year becomes more challenging as benchmarks are increasingly based on past achievements. To continue thriving, ACOs will need to innovate in care management (e.g., specialist cost management), leverage advanced analytics, and find new ways to improve patient outcomes and efficiency. Although not specific to 2026, we recommend that ACOs apply careful consideration and a strategic approach to ACO participation decisions as part of their annual planning.
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In summary
For ACOs, 2025 has been a pivotal year, with ongoing policy evolution, cost pressures, and new models shaping the path forward. By focusing on these five critical issues, ACOs can position themselves for sustained success in 2026 and beyond.
1 Centers for Medicare and Medicaid Services. (2025, October 31). CMS modernizes payment accuracy and significantly cuts spending waste [Press release]. https://www.cms.gov/newsroom/press-releases/cms-modernizes-payment-accuracy-significantly-cuts-spending-waste.
2 Department of Health and Human Services. (2025, November 5). 42 CFR Parts 405, 410, 414, 424, 425, 427, 428, 495, and 512. Federal Register. https://www.federalregister.gov/documents/2025/11/05/2025-19787/medicare-and-medicaid-programs-cy-2026-payment-policies-under-the-physician-fee-schedule-and-other#p-1754.