Dive Brief:
- The CMS has announced a successor for an expiring value-based care pilot in traditional Medicare that experts say should entice more providers into 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, the CMS said Thursday.
- ACO LEAD includes better benchmarks, prospective payments, a longer duration and other policies that regulators said would level the playing field between different types of providers, and allow for more people, including those needing complex care, to participate. Analysts and accountable care groups said ACO LEAD is a favorable development for companies in Medicare value-based care.
Dive Insight:
In 2023, ACO REACH replaced the previous direct contracting arrangement, wherein accountable care organizations take on risk to care for seniors in traditional Medicare. Despite tweaks by the CMS over ACO REACH’s tenure — most recently, regulators modified how benchmarks and risk scores are measured — participation has been underwhelming, with many providers electing not to participate or dropping out due to financial and administrative barriers.
Still, 103 accountable care organizations covering almost 162,000 healthcare providers signed onto ACO REACH for 2025. The model’s expiration at the end of next year created a vacuum for those providers — and the 2.5 million people on traditional Medicare for whom they provided care.
The CMS has now filled that vacuum with ACO LEAD. The agency’s announcement about the new model didn’t share many specifics, but the release points to certain core similarities with ACO REACH.
Like its predecessor, ACO LEAD will have two voluntary risk-sharing tracks: global risk, in which ACOs can receive up to 100% of their savings but are liable for to 100% of their losses relative to a benchmark; and professional risk, in which ACOs can receive up to 50% of their savings but are liable for up to 50% of their losses.
Other similarities include flexible capitated payments allowing for contracting 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 value-based care model’s penetration in areas that have been neglected in to date, according to regulators and analysts.
For one, the model has a 10-year performance period — the longest the CMS has ever established. Benchmarks will be set initially and maintained over the entire decade, rather than being reset or “rebased” periodically, which should give more predictability for participating physician groups, analysts said.
In addition, ACO LEAD has a greater focus on including high-needs patients, by including more accurate risk adjustment and other features that will boost providers’ ability to integrate complex patients into the ACO rather than caring for them under a separate track, regulators said. The CMS did not specify ACO LEAD’s risk adjustment methodology.
The model will also focus on better coordinating care for patients dually eligible for Medicare and Medicaid, the CMS said.
Regulators plan to identify two states that are interested in developing a framework for partnerships between Medicare ACOs and Medicaid during an initial planning phase, which will run from March 2026 through December 2027, before hopefully operationalizing those partnerships in the real world.
ACO LEAD will also enable participating provider groups to have episode-based risk arrangements with specialists, and offer an add-on payment for rural healthcare providers to help them invest in the infrastructure needed to become an ACO. Providers new to ACOs, including rural providers, will also be able to serve as ACOs with fewer patients than normally required, the CMS said.
ACO LEAD will also include incentives for Medicare beneficiaries to participate, including through cost-sharing for outpatient services and, by 2029, the option to “buy down” their Medicare prescription drug premiums.
Accountable care associations welcomed the new model, calling out in particular its timeframe and focus on high-need populations as value-adds 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 prior ACO models and responds directly to barriers that have limited participation,” advocacy group Accountable for Health said in a statement Thursday.
ACO LEAD has “multiple elements” that might appeal to providers as they consider what to do after ACO REACH ends, Susan Dentzer, president and chief executive officer of America’s Physician Groups, said in a statement.
Jefferies analyst Jack Slevin said the model is a “clear positive” for value-based care companies in ACO programs like Astrana, Agilon and Privia, especially since it implies regulators want to make the market more accessible, while removing risk for providers stemming from ACO REACH’s looming expiration.
“Specific efforts to engage with high-needs & Medicaid patients should help drive incremental penetration in [traditional Medicare value-based care],” which has roughly 34 million members but less than 50% value-based care penetration today, Slevin wrote in a note Thursday.
