Medicare unveils successor to ACO REACH

Diving brief:

• CMS announced a successor to a value-based care pilot under traditional Medicare that experts say should incentivize more providers to adopt accountable care arrangements.
• The Long-Term Enhanced ACO Design, or LEAD, model will begin after ACO REACH ends at the end of 2026, providing a direct off-ramp for providers in the pilot project, CMS announced Thursday.
• ACO LEAD includes better benchmarks, prospective payments, longer duration and other policies that regulators say would level the playing field among different types of providers and allow more people, including those with complex care needs, to participate. Analysts and accountable care groups said ACO LEAD is a favorable development for Medicare value-based care companies.

Dive overview:

In 2023, ACO REACH replaced the previous direct contract arrangement, in which accountable care organizations assume the risk of caring for older adults under traditional Medicare. Despite changes made by CMS during ACO REACH’s tenure (most recently, regulators changed how benchmarks and risk scores are measured), participation has been disappointing, with many providers choosing not to participate or dropping out due to financial and administrative barriers.

Still, 103 accountable care organizations covering nearly 162,000 health care providers have signed ACO REACH for 2025. The expiration of the model at the end of next year has created a void for these providers — and for the 2.5 million people in traditional Medicare for whom they provided care.

CMS has now filled this void with ACO LEAD. The agency’s announcement about the new model doesn’t share many details, but the release highlights some fundamental similarities to ACO REACH.

Like its predecessor, the LEAD ACO will have two voluntary risk-sharing components: global risk, in which COA can receive up to 100% of their savings but are responsible for up to 100% of their losses compared to a benchmark; and professional risk, in which COA can receive up to 50% of their savings but are responsible for up to 50% of their losses.

Other similarities include flexible capitation payments to contract with other providers in value-based care arrangements.

But ACO LEAD is a very different beast from ACO REACH, in ways that should help expand the penetration of the value-based care model into areas that have been neglected until now, according to regulators and analysts.

For one, the model has a 10-year performance period – the longest CMS has ever established. The criteria will be set initially and maintained throughout the decade, rather than being reset or “rebased” periodically, which should give more predictability to participating physician groups, analysts said.

Additionally, the LEAD ACO focuses more on including high-needs patients, including more granular risk adjustment and other features that will strengthen providers’ ability to integrate complex patients into the ACO rather than care for them in a separate setting, regulators said. CMS has not clarified the LEAD ACO risk adjustment methodology.

The model will also focus on better coordination of care for dual eligible Medicare and Medicaid patients, CMS said.

Regulators plan to identify two states interested in developing a partnership framework between Medicare and Medicaid ACOs during an initial planning phase, which will run from March 2026 to December 2027, before hopefully operationalizing these partnerships in the real world.

ACO LEAD will also allow participating provider groups to enter into episode-based risk agreements with specialists and will offer additional payment to rural healthcare providers to help them invest in the infrastructure needed to become an ACO. New ACO providers, including rural providers, will also be able to serve as ACOs with fewer patients than normally required, CMS said.

ACO LEAD will also include incentives for Medicare beneficiary participation, including through cost sharing for outpatient services and, by 2029, the ability to “lower” their Medicare prescription drug premiums.

Accountable care associations welcomed the new model, particularly highlighting its timing and focus on populations most in need as added value for an ACO arrangement in traditional Medicare.

“A 10-year model with more predictable benchmarks, prospective payments, and enhanced tools for prevention and care coordination reflects lessons learned from previous ACO models and directly addresses the barriers that have limited participation,” the advocacy group Accountable for Health said in a statement Thursday.

ACO LEAD has “several elements” that may be of interest to providers as they consider what to do after ACO REACH ends, Susan Dentzer, president and CEO of the American Physician Groups, said in a statement.

Jefferies analyst Jack Slevin said the model is “clearly positive” for value-based care companies in ACO programs like Astrana, Agilon and Privia, especially since it implies that regulators want to make the market more accessible, while removing risks for providers stemming from the impending expiration of ACO REACH.

“Specific efforts to engage with high-needs and Medicaid patients should help drive gradual penetration into [traditional Medicare value-based care],” which today has about 34 million members but less than 50% penetration of value-based care, Slevin wrote in a note Thursday.