ACO REACH Brings Next Era of Medicare Payment Models


The Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model provides the next great opportunity in moving a health care payment system toward paying for value and rewarding preventive care and keeping patients healthy.

The future of accountable care in Medicare was at a crossroads late this past winter. According to multiple news reports,1 the Biden administration was strongly considering canceling the Global and Professional Direct Contracting (GPDC) Model. It was a Trump-era value-based care model that built upon the successful Next Generation Accountable Care Organization (ACO) Model by adding more options for capitated payments. The White House and HHS Secretary Xavier Becerra were strongly persuaded by some progressives in Congress that GPDC needed to be permanently ended to protect patients and Medicare’s future.2

Fortunately, cooler heads prevailed, and CMS evolved GPDC to a more traditional ACO model, adding numerous beneficiary protections and creating the first Medicare payment model with serious, tangible health equity requirements. The ACO Realizing Equity, Access, and Community Health (REACH) Model will officially launch next year after a summer-long application process.

With Medicare’s solvency in serious jeopardy, we need more emphasis than ever on growing accountable care models that improve patient care while reducing costs. Terminating GPDC would create fewer options. Instead, ACO REACH provides the next great opportunity in moving a health care payment system toward paying for value and rewarding preventive care and keeping patients healthy. It increases the voice of providers and further ensures patients’ rights while sending a strong signal that advancing toward value-based care is the direction we need to take. We hope that REACH provides a great opportunity for value-based care’s future but also dispels doubts about our need to shift to more value-based care models.

Recently Announced Changes

Health equity. For starters, the ACO REACH Model is an improvement of GPDC. ACO REACH is the first model launched by CMS that puts a strong emphasis on health equity. All ACOs in the model will have to develop a plan for how they will identify health disparities in their respective communities and then take specific actions to address those disparities. This requirement is truly the first of its kind in Medicare. ACOs must then collect patients’ demographic and social determinants of health data, another requirement that does not exist in Medicare. In future years, ACOs may receive a downward adjustment on the total quality score for incomplete reporting of these demographic data. As part of the application process, CMS will consider applicants’ demonstrated ability to provide high-quality care to underserved communities.

Probably of greatest significance is the introduction of a health equity benchmark adjustment. ACOs’ financial spending targets will be higher and easier to hit if they serve the most socially and economically at-risk patients. Conversely, ACOs that serve the least at-risk patients will have their benchmarks slightly lowered. There are questions about the budget-neutral approach to these adjustments and whether there are better ways to incentivize providers to treat more underserved patients. Nonetheless, those who continue to call for REACH’s cancellation are calling for the termination of the only Medicare model to have tangible health equity requirements.

Oversight. In response to concerns raised by some progressives in Congress, REACH adds numerous additional lines of oversight, audits, and beneficiary protections. The list of additional eyes on ACOs is long and includes CMS assessing whether patients are being shifted into or out of Medicare Advantage (MA) plans, risk score growth (to identify inappropriate coding practices), anticompetitive behavior and misuse of beneficiary data, and patients’ access to care, including the stinting of care, which was a particularly pressing concern of some progressives in Congress.

It’s important to remember that under REACH, GPDC, and all other Medicare ACO models, beneficiaries keep all of their rights, coverage, and benefits, including the right to see any willing Medicare provider. There are no networks in traditional Medicare, and prior authorization isn’t allowed. It’s also important to remember that under ACO models, because providers are responsible for all their assigned patients’ spending for the entire year, providers are incentivized to make sure each patient is receiving high-quality, attentive, well-coordinated, and efficient health care. These incentives, which don’t exist outside of ACOs, help ensure that patients are treated well and receive high-quality care. Although the risk of patient abuse and neglect was minimal under GPDC, these additional oversights and protections by CMS will only further enhance patients’ rights.

Greater beneficiary and provider voices. ACO REACH makes a return to more traditional ACO models by mandating that 75% of governing bodies—the boards that set the broad, strategic vision of the ACOs’ work—be made up of participating providers. Under GPDC, it was just 25%. Also under REACH, an ACO’s beneficiary representative and consumer advocate must be separate individuals, and each must hold full voting rights. All these recent changes enhance both the provider and patient voices.

Financials. A concern expressed by opponents of GPDC was the incentive for organizations to overstate how sick their patients are for their own financial gain, and this too is addressed by ACO REACH. There were already multiple limits on how fast risk scores could grow, but CMS added more. The new additions prevent inflation of the sickness of patients in order to collect higher benchmarks and more money from CMS.

ACO REACH also reduces the discount applied to those taking on full risk. The discount—the immediate savings generated that go to CMS first before an ACO sees any savings itself—was extremely high under GPDC, going up to as much as 5%. ACO REACH lowers it to 3.5%. CMS also lowered the percent of dollars withheld and then able to be earned back through quality performance. These changes open the door to ACOs that are less well-funded and lessens the dependence on financial capital to participate in the model, a good thing overall for provider-based organizations.

Geographic Direct Contracting. While announcing these changes, CMS also put to rest any doubt about the future of the Geographic Direct Contracting Model by permanently canceling it. “Geo,” as it was called, would place all traditional Medicare beneficiaries in a region under the care of a single entity, allowing regional entities powers such as prior authorization to better manage patients. However, it also raised serious concerns about beneficiary protections and working with downstream providers. Geo was often conflated with GPDC, so ending Geo solidified GPDC’s future work.

Why the Model Is Needed

Without value-based care models, traditional Medicare pays providers solely on a fee-for-service model. The more often patients get sick, and the more they go to the hospital or emergency department, the more money providers make. Under the fee-for-service model, the financial incentives are perverse and don’t encourage doctors to keep patients healthy, manage their chronic diseases, screen for cancers, and the like. The opposite is true under value-based care models, in which doctors and hospitals can make more money if they keep patients out of the hospital.

Patients in ACO REACH—and other ACO models—actually receive more benefits than those in traditional Medicare. Broad use of telehealth is allowed, as is the waiving of a requirement for a 3-day inpatient hospital stay before an admission to a skilled nursing facility. Patients can receive cost-sharing support to help with co-pays and rewards for managing their chronic diseases. REACH also allows much more generous use of home visits after patients leave the hospital.

Medicare has a finance problem. It is spending more money than it is taking in, and the Part A trust fund will be insolvent by 2026, according to the most recent estimates.3 Not coincidentally, MA is growing at a staggering pace and will care for a majority of Medicare patients at some point in the immediate future. Medicare spends 4% more on MA than it would spend on traditional Medicare, according to the Medicare Payment Advisory Commission.4 Also, private MA plans in the aggregate have never produced savings for Medicare and quality cannot be accurately assessed. So whereas MA plans are spending more and we can’t determine whether patients are receiving high-quality care, ACOs are both saving money and providing high-quality care to patients. Furthermore, there will always be Medicare beneficiaries who choose not to enroll in an MA plan because they do not want to give up their choice of providers.

The bottom line is this: Policy makers need to do more to strengthen traditional Medicare. Traditional Medicare needs more and better ways to control spending or it risks losing out totally to MA. That’s the point of all CMS Innovation Center models, including GPDC and ACO REACH.

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