Minnesota Accountable Care Organizations: Medicaid and Medicare

Minnesota’s accountable care organizations operate on two tracks: a state-run Medicaid program called the Integrated Health Partnership (IHP), which as of July 2024 included 25 partnerships covering more than 505,000 beneficiaries, and federal Medicare ACO programs in which several of the state’s largest health systems participate under rules set by the Centers for Medicare and Medicaid Services.¹ Both tracks share the same core idea — groups of providers agree to be accountable for the total cost and quality of care for a defined patient population, and share in the savings or losses that result.

The Integrated Health Partnership: Minnesota’s Medicaid ACO

The IHP is authorized under Minnesota Statutes § 256B.0755 and operates under § 1905(t) of the Social Security Act. It brings providers together to take responsibility for Medicaid enrollees attributed to them.² The program grew out of Minnesota’s 2008 health reform law and 2010 enabling legislation, with the demonstration itself launched by Governor Mark Dayton’s Executive Order 11-30 in October 2011.³

Participating entities range from large health systems to federally qualified health centers. Through 2022, the program had generated nearly $546 million in total savings, and in 2018 it was overhauled as “IHP 2.0” to place greater weight on health equity and social determinants of health.¹

How Payment and Risk Work

Providers continue to bill and get paid through standard Medicaid fee-for-service. On top of that, IHP entities sign contracts with the state — now up to five years in length — making them responsible for the total cost of care for their attributed population. Patients are attributed retrospectively based on claims data. Several groups are excluded: people dually eligible for Medicare and Medicaid, those with emergency-only Medicaid coverage, and participants in Minnesota Senior Care Plus.²

All IHPs receive a quarterly, risk-adjusted population-based payment to fund care coordination. Track 2 entities take on fuller financial risk, sharing both savings and losses relative to a cost-of-care target, with gain- and loss-sharing kicking in only when results differ from the target by at least 2%.² The program also distinguishes between a virtual integration track, which lets providers coordinate without forming a single legal entity, and a full risk track with more comprehensive financial responsibility.¹

Quality drives much of the financial picture. For Track 2 entities, quality scores can mitigate losses or increase savings, with the impact negotiated between the entity and the Department of Human Services and capped between 25% and 100%.²⁴⁵

Equity, Social Needs, and Behavioral Health

Under IHP 2.0, every participant must develop interventions targeting specific social risk factors in its patient population, commonly including housing instability, food insecurity, transportation barriers, social isolation, and language access. The quality framework includes dedicated “Closing Gaps” and “Equitable Care” domains designed to reduce racial, geographic, and other disparities.¹

Behavioral health runs through the model as well. Minnesota considers behavioral health in patient attribution, so enrollees who have received care at a behavioral health home or health care home can be attributed on that basis. IHPs can negotiate more favorable financial terms, retaining up to 70% of savings, by forming “accountable partnerships” with community organizations such as community mental health centers. Evaluations have found that IHP clinics outperform non-IHP clinics on measures including adolescent mental health screening and on quality metrics for diabetes and asthma.⁶

Hennepin Health: A Safety-Net Variant

Hennepin Health, launched in 2012, operates as a safety-net ACO for Hennepin County (Minneapolis), targeting high-need Medicaid adults with incomes below 133% of the federal poverty level.⁷ It is led by the county government and structured as a full-risk partnership among four entities: Hennepin County Human Services and Public Health, Hennepin County Medical Center, Metropolitan Health Plan (a county-run Medicaid managed care plan), and NorthPoint Health and Wellness Center (a federally qualified health center).⁸

It uses per-member per-month capitation and deploys multidisciplinary teams of nurse care coordinators, social workers, psychologists, addiction counselors, and community health workers around a “housing first” approach. Between its launch and 2015, medical costs fell roughly 11% annually, emergency department visits dropped 9.1% between 2012 and 2013, and the ACO reinvested about $3 million in surplus funds into community-based initiatives.⁸ Hennepin Healthcare System also participates in the IHP as a Round 2 entity, with roughly 29,500 attributed lives.⁷

Recent Changes and a Legislative Challenge

State Plan Amendment 23-0019, approved in November 2023 and effective January 1, 2024, extended contract terms to up to five years, strengthened the role of quality so that performance can now mitigate losses rather than only reduce savings, and removed low-value administrative requirements. The state also introduced a policy eliminating shared losses during months when a significant portion of an IHP’s population is affected by a federally declared extreme circumstance such as a natural disaster.² The Department of Human Services has released a 2026 IHP Request for Proposals, continuing the program into a new contract cycle.⁹

The program’s future is not uncontested. HF 255, introduced in the 94th Minnesota Legislature (2025–2026), would repeal § 256B.0755 and replace it with a “Patient-Centered Care” program under which the state would pay providers directly rather than through managed care plans or IHP networks. Existing IHP contracts would not be renewed after January 1, 2026.¹⁰ As of the time this research was compiled, the bill had been introduced but the IHP program was continuing to operate.

Medicare ACOs in Minnesota

Several of Minnesota’s largest health systems participate in federal Medicare ACO programs run by CMS. These operate under federal rules, not state authority.

Medicare Shared Savings Program

MSSP is the largest ACO initiative in the country. In 2026, 511 ACOs participate nationally, covering 12.6 million people. For the most recently reconciled year (2024), MSSP ACOs collectively earned $4.1 billion in shared savings and saved Medicare $2.5 billion.¹¹

The Mayo Clinic Community ACO entered MSSP in July 2019 and covers Mayo Clinic’s Rochester campus and all Mayo Clinic Health System locations in Minnesota and Wisconsin.¹² In its initial half-year, it served nearly 60,000 Medicare beneficiaries, generated $14.75 million in Medicare savings, and received a shared savings payment of $5.9 million.¹³ Essentia Health, based in Duluth, re-entered MSSP in performance year 2025 after a gap year in 2024.¹⁴ M Health Fairview transitioned into MSSP in 2026 after leaving ACO REACH at the end of 2025.¹⁵

ACO REACH and What Replaces It

The ACO Realizing Equity, Access and Community Health model, which succeeded the Direct Contracting Model, is scheduled to conclude at the end of 2026.¹¹ Minnesota participants for the 2026 performance year include Allina Health System and Park Nicollet Health Services ACO (doing business as HealthPartners ACO), along with national entities operating in the state.¹⁶ Allina Health reported $6.8 million in shared savings for performance year 2023.¹⁷ HealthPartners ACO reported shared losses in both 2022 under Direct Contracting and 2023 under ACO REACH, with the 2023 loss totaling roughly $3.8 million. HealthPartners has stated that any savings are reinvested in care infrastructure rather than distributed to participating providers.¹⁸

Minnesota systems have not stayed in federal models uniformly. In 2018, both Allina Health and Fairview Health Services exited the CMS Next Generation ACO Model after objecting to changes CMS made to risk adjustment. A Fairview spokesperson said the model design “penalizes ACOs that already deliver high-quality, low-cost care.”¹⁹

When ACO REACH ends after 2026, CMS plans to replace it with the Long-term Enhanced ACO Design (LEAD) model, launching January 1, 2027. LEAD is designed to run for a decade and specifically targets rural health clinics, independent practices, and specialized providers, using improved benchmarking, flexible capitated payments, and a predictable 10-year performance period without rebasing. CMS is also planning a Medicaid integration component, with an initial planning phase from March 2026 through December 2027 to partner with two states on frameworks for coordinating care for dually eligible beneficiaries, a population the IHP already excludes from its attribution.²⁰

Known Criticisms and Limits

A white paper prepared for the Minnesota Legislature flagged structural concerns about the ACO approach. Chief among them: provider consolidation under ACOs can create “undue market power,” especially in horizontal mergers of hospitals or single-specialty groups that increase negotiating leverage without necessarily improving care coordination. The paper also noted that provider exclusivity presents a tension — needed in larger markets to create meaningful competing organizations, but risking the viability of independent providers in smaller or rural ones. Federal minimum volume requirements can be hard to meet in small communities without concentrating local market share to a degree that raises antitrust questions.²¹

A 2015 state assessment found that Minnesota’s ACOs had developed expertise in fewer than one-third of the capabilities considered necessary for optimal implementation, including population health management, patient engagement, and clinical decision support. Fee-for-service still dominated provider revenue, and two-thirds of surveyed providers reported that 10% or less of their revenue was tied to ACO risk arrangements.²² The underlying design question — whether a shared-savings layer on top of fee-for-service produces the right incentives — is part of what drives the HF 255 debate over whether the IHP has become an unnecessary intermediary.¹⁰

1
SHADAC. Integrated Health Partnerships: Minnesota’s Medicaid Accountable Care Organization
2
Medicaid.gov. Minnesota State Plan Amendment 23-0019
3
Commonwealth Fund. Medicaid Accountable Care in Minnesota
4
Minnesota Department of Health. Health Care Homes and IHP Overview
5
Minnesota Department of Human Services. IHP Quality Methodology
6
National Academy for State Health Policy. Three States’ Strategies to Improve Behavioral Health Through Medicaid Accountable Care Programs
7
Milbank Memorial Fund. Medicaid Payment and Delivery System Innovation: Minnesota’s Experience
8
Commonwealth Fund. Hennepin Health: A Care Delivery Paradigm for New Medicaid Beneficiaries
9
Minnesota Department of Human Services. Integrated Health Partnerships RFP
10
Minnesota Office of the Revisor of Statutes. HF 255, 94th Legislature
11
CMS. 2026 Medicare ACO Initiatives Participation Highlights
12
Mayo Clinic. ACO Frequently Asked Questions
13
Mayo Clinic News Network. Mayo Clinic Community ACO Delivers High-Quality Care and Medicare Savings
14
Essentia Health. Medicare Shared Savings Program
15
M Health Fairview. ACO REACH for Medicare
16
CMS. ACO REACH PY2026 Participants
17
Allina Health. ACO REACH
18
HealthPartners. ACO
19
AJMC. Seven ACOs Exit Next Generation Model, Blaming CMS for Unilateral Changes
20
CMS. LEAD Model
21
Minnesota Legislative Coordinating Commission. ACO White Paper
22
Minnesota Department of Human Services. ACO Infrastructure Assessment