Cost report prompts tweaks to ACO REACH model

The Centers for Medicare and Medicaid Services is making changes to its largest accountable care organization experiment to ensure it’s actually saving money.

In a notice published on its website Aug. 1, CMS outlines a slew of planned updates to the ACO Realizing Equity, Access and Community Health, or ACO REACH, model in 2025.

Notably, the agency is changing how it establishes benchmarks for "high-needs population" ACOs to guard against overspending while addressing the so-called "ratcheting effect," under which ACOs that contain spending face higher hurdles to earning shared savings in future years because of their past successes.

CMS also seeks to control costs by increasing the cut it takes off the top of savings produced by "global risk-sharing" ACOs — which assume all losses or savings relative to annual benchmarks — by increasing the "discount" applied to the benchmark from 3.5% to 4%. This effectively raises the bar for ACO REACH participants.

These and the other planned updates to ACO REACH, many of which are technical in nature, reflect the balance CMS must find as it advances its value-based care agenda.

Related: CMS floats proposals to boost Medicare ACOs

In 2021, the agency announced an ambitious goal to have all fee-for-service Medicare enrollees under accountable care arrangements by 2030. To do so, CMS needs buy-in from healthcare organizations, which means making ACOs as lucrative as possible for participants. At the same time, the overarching goal is to constrain Medicare spending, and those priorities can be at odds.

From an ACO perspective, that makes CMS' plans for next year a mixed bag, and the agency acknowledged that not all current participants may remain in ACO REACH.

“ACO REACH is a voluntary model, and we understand that some ACOs may make the choice to leave the model for their own business reasons if they determine the ACO REACH model — as opposed to other ACO initiatives, such as the Medicare Shared Savings Program — is not their best fit,” a CMS spokesperson wrote in an email. “We do not anticipate that these changes to ACO REACH model will significantly impact the goal of having 100% of traditional Medicare beneficiaries in accountable care relationships by 2030.”

ACO REACH emerged from the Global and Professional Direct Contracting model, which CMS discontinued in 2022 despite evidence it was saving money.

The agency billed the replacement model as more provider-friendly and as a superior way to link quality to reimbursement. ACO REACH also features an emphasis on health equity. ACO REACH has attracted many more providers, but fewer health insurance companies.

The 2025 updates are consistent with CMS' aspirations for ACO REACH, but making updates founded on the Global and Professional Direct Contracting model means they won't necessarily be effective at reducing spending, said Mara McDermott, CEO of the value-based care trade group Accountable for Health.

And CMS reworking the rules every year itself may discourage participation, McDermott said.

Yet this kind of experimentation is the exact remit of the Center for Medicare and Medicaid Innovation, which oversees ACO REACH, said Eric Becker, vice president of ACO REACH and Medicare innovation strategies at the healthcare services and technology company Agilon Health.

Indeed, CMMI is required to evaluate how its projects fare and tweak them to improve results, said William Bleser, research director of healthcare transformation for social needs and health equity at the Duke University Margolis Institute for Health Policy. Successful initiatives often take years to generate sustained savings, he said.

“When you're creating new models, by definition, some things are new. You're starting from scratch, and no one's going to get that right on the first time. So making changes in the middle of a performance year or between performance years is very normal and expected,” Bleser said.

At the same time, it's difficult to assess the wisdom of the latest round of changes because CMS hasn't released performance data from ACO REACH's inaugural year in 2023, Bleser said.

CMS also needs to look past ACO REACH, which is scheduled to expire at the end of 2026, Bleser said.

To sustain progress and dissuade providers from abandoning novel payment programs and returning to fee-for-service operations, the agency should consider transferring key aspects of ACO REACH, such as its financial structure and its health equity provisions, to other models, Bleser said.

In fact, CMS has already started to do that, most recently in the proposed rule to set Medicare physician reimbursements for 2025.

Under the draft regulation, successful Shared Savings Program ACOs would have access to advances on their projected savings, as they do in ACO REACH. The agency also requested comment on creating a Shared Savings Program track for participants that want to assume greater financial risk, akin to ACO REACH, which CMS believes could ease transitions from one model to the other after 2026.