How ACO REACH seeks to transform payment

To transform the healthcare industry by reducing costs and improving quality, the federal government is seeking to change how it pays for healthcare. The Centers for Medicare and Medicaid Services has been testing payment models through its innovation center, aiming to find an alternative to the traditional fee-for-service system, which has led to healthcare comprising nearly 20% of the U.S. economy.

Although most of these experiments have been unsuccessful—only six out of more than 50 tested models generated savings for Medicare in 2021, according to CMS—there is hope among providers for the Accountable Care Organization Reimagined to Achieve Equity and Community Health model, better known as ACO REACH.

What is ACO REACH?

ACO REACH is an updated version of the discontinued Global and Professional Direct Contracting Model. Changes include new risk adjustments that incentivize providers to take on high-needs patients and health equity requirements. ACO REACH aims to increase quality and reduce unnecessary spending through better care coordination.

CMS launched the model in January and will test it through 2026. This year, 132,000 providers treating 2.1 million beneficiaries make up the 132 ACOs in the program.

“We’re going to reduce unnecessary ER visits, unnecessary hospitalizations, unnecessary testing—anything that’s not producing anything beneficial and that’s just costing the system excessive wasted dollars,” said Paola Bianchi Delp, president of CareNu, an ACO REACH participant. Delp also is chief business development officer for Tampa, Florida-based Chapters Health System, which spun off CareNu as a for-profit care management company in 2021.

Who participates in ACO Reach?

Mostly providers, through accountable care organizations. ACOs coordinate care for Medicare beneficiaries and may include hospitals, independent medical practitioners, retailers, health insurance companies, and administrative and data partners.

For example, CVS Health operates an ACO in eight states through its health management, insurance and pharmacy subsidiaries, and Downers Grove, Illinois-based Advocate Health operates an ACO in the Midwest.

Chapters Health System, a nonprofit advanced chronic illness provider, partnered with management services company Next Healthcare Solutions to create Assurity DCE, an ACO that provides hospice care in Florida. The health system also collaborates with data analytics and predictive modeling vendors to guide clinical care, Delp said.

The ACO REACH model emphasizes provider control by requiring that providers occupy at least three-quarters of the seats on their governing bodies.

How does the model work?

ACOs participating in the ACO REACH model receive up-front payments, which are designed to give providers flexibility to manage care. ACO REACH focuses on primary care and on preventing adverse outcomes by improving care management and promoting preventive services.

The payment model allows providers to offer services that fee-for-service Medicare traditionally does not cover — such as in-home visits, transportation assistance and nutrition counseling — that serve the program’s quality and cost aims.

Many ACOs have established interdisciplinary teams that include nurses, social workers, pharmacists and behavioral health specialists to support primary care doctors.

“This really ends up creating a space where you can innovate and learn and try new things,” said Don Calcagno, chief population health officer for Advocate Health. “We know health equity is a big issue, and if we don’t get serious about transforming the care models, we’re gonna have a hard time closing those gaps.”

Risk sharing and risk adjustment

ACO REACH participants can choose between two forms of risk-sharing: professional and global. The professional option offers capitated payments for primary care and sharing risk with CMS. Providers and the government split losses or savings 50%. Under the global option, ACOs take on full responsibility for costs and outcomes, meaning they keep any savings they generate or absorb any losses. Global option participants also may expand beyond primary care to include specialty care.

CMS has also issued new risk-adjustment policies and payment incentives for ACOs that treat high-needs patients. CMS offers an extra $30 per beneficiary per month to ACOs that serve the neediest 10% of enrollees. That upside adjustment is offset by a $6 downward adjustment for treating the 50% of beneficiaries who CMS considers to be at lowest risk.

For ACOs that care exclusively for high-needs patients, CMS will assess claims data and patient acuity levels throughout the year and adjust payments based on those factors. For standard ACOs, that process uses utilization data from the prior year to project medical spending, while ACO REACH limits participants’ overall risk score growth to 3% yearly.

“Having a concurrent risk-adjustment model to reflect those patient changes throughout the year is really vital in making the model financially sustainable,” said Franke Elliott, chief strategy officer at Bloom Healthcare, which operates a high-needs ACO REACH program in Colorado.

Health equity measures

The most significant changes from the direct contracting model involve new health equity initiatives. ACO REACH requires ACOs to develop and submit health equity plans, collect sociodemographic data and screen beneficiaries for health-related social needs.

The payment methodology includes a “health equity benchmark adjustment” to attract providers serving underserved beneficiaries to ACOs. The model also encourages ACOs to identify underserved communities using the Area Deprivation Index and carry out initiatives to reduce health disparities.

ACOs have conducted patient assessments to better understand barriers to health and are implementing benefits aimed at accessibility, nutrition, language services, social isolation and housing.

Early outcomes

The first tranche of data from ACO REACH participants is expected to be available this summer. ACOs report obstacles to identifying high-needs populations and recruiting providers, but remain optimistic.

Assurity has reduced spending and emergency department utilization while maintaining high-quality care, Delp said. Advocate clinicians are encouraged by the data support and wraparound services that enable them to practice at the top of their licenses, Calcagno said. The payment model is attractive to providers targeting high-needs populations, Elliott said.