Accountable care organizations (ACOs) are a relatively new healthcare delivery model in which various provider organizations assume joint responsibility for the care of a defined patient population. A primary purpose of ACOs is to curb the growth in healthcare costs through an incentive structure that jointly assesses performance and disburses rewards. We argue in this study that a fuller understanding of the impact of ACOs on cost performance requires examination of theories that can predict the relationship between the ACO incentive structure and performance. To this end, we examined two competing hypotheses that have contradictory predictions on the relationship between participation in ACOs and cost performance. We also investigated how the size of ACOs and Medicare intensity, or the proportion of Medicare patients served by hospitals, matter in the relationships examined. We used a panel dataset of U.S. hospitals and relied on a doubly robust estimator that consisted of propensity score-weights and the difference-in-difference estimator to identify the effects of hospital participation in ACOs on cost performance and on the moderating roles of ACO size and Medicare intensity in the relationship. Our results show that hospital participation in ACOs is associated with worsened cost performance. Free riding is identified as a key factor that affects this relationship. The results of supplemental analysis also show that whereas the negative effects of free riding on cost performance are worse for hospitals participating in larger ACOs, it is attenuated for hospitals serving higher proportions of Medicare patients (i.e., hospitals with higher Medicare intensity)