LEAD Model: Long-term Enhanced ACO Design

ValuesEdge Executive Intelligence Brief

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1. Executive Summary and Strategic Context

What Is This Model and What Problem Does It Solve?

The Long-term Enhanced ACO Design (LEAD) Model is CMMI's successor to the ACO REACH Model, designed to launch January 1, 2027, and run through December 31, 2036. It is the longest performance period CMS has ever tested — a deliberate structural choice, not a cosmetic one. The 10-year horizon without rebasing is the model's central architectural innovation, designed to solve a problem that has plagued every prior ACO model: the "ratchet effect," in which ACOs that successfully lower costs find their benchmarks reset downward, eliminating the financial reward for sustained performance improvement.

As of June 2025, only 45% of Original Medicare beneficiaries were aligned to either the Shared Savings Program or ACO REACH. CMS internal research found that through 2022, only approximately 20% of TINs with assignable beneficiaries participated in any CMS Innovation Center ACO or the Shared Savings Program. Non-participating practices exhibited higher per-beneficiary spend, meaning the provider organizations with the greatest opportunity to generate taxpayer savings are precisely those that have not entered the ACO market. LEAD is explicitly designed to change that calculus.

The model targets three distinct provider failure modes: (1) smaller, independent, and rural practices that lack the infrastructure to absorb ACO administrative burden; (2) providers serving high-cost, complex populations — including those dually eligible for Medicare and Medicaid and homebound patients — who have faced inadequate risk adjustment in prior models; and (3) higher-spending ACOs that rational actors would not form under traditional benchmarking because they cannot achieve savings relative to their own historical costs without a structural adjustment.

LEAD addresses all three simultaneously through improved benchmarking, prospective capitated payments, integrated High Needs support, and a suite of beneficiary engagement tools unavailable in prior models.

Strategic Significance for the VBC Market

LEAD represents CMMI's most consequential structural bet on the ACO model since ACO REACH. Several design features have direct market significance for health system executives and ACO strategists:

No rebasing for 10 years. Benchmarks are set using historical baseline expenditures and trended forward at a rate CMS describes as "above actually observed expenditure growth" but below what Medicare spending would be absent ACO participation. This "wedge" creates a durable, predictable savings opportunity that is explicitly designed to persist across the full model period. For ACO operators who have exited prior models because the benchmark reset punished their success, this is a fundamentally different risk/reward structure.

Convergence pathway for higher-spending ACOs. Early in the model, higher-spending ACOs receive benchmark adjustments that allow them to participate without immediate penalty. Over the 10-year period, Medicare Parts A and B costs for both higher- and lower-spending ACOs are designed to gradually converge, building the foundation for a future transition away from individual ACO historical benchmarks entirely. Executives evaluating LEAD should understand this as a transitional architecture — not a permanent steady state — that CMS expects will ultimately produce blended regional benchmarks.

Capitated payment options create cash flow independence from FFS billing. The availability of Total Care Capitation (TCC) and Primary Care Capitation (PCC) payments gives ACOs prospective, population-based cash flows that allow investment in care transformation without waiting for FFS billing cycles. This fundamentally changes the capital structure of ACO operations and enables downstream value-based arrangements with specialists.

Benefit Enhancements and the Part D premium buy-down create a consumer-facing competitive advantage for LEAD ACOs that no prior model has offered. By 2029, ACOs can offer aligned beneficiaries a Part D premium buy-down, alongside Part B cost-sharing support available from launch. These tools give ACOs the ability to stimulate consumer demand for their network — a market mechanism CMS explicitly acknowledges was "missing in previous ACO models."

CARA — the CMS-Administered Risk Arrangements initiative — brings specialists into accountable care in a structurally new way. Rather than relying on ACO-to-specialist contracting alone, CMS directly facilitates episode-based risk arrangements between ACOs and their Preferred Providers across acute medical, procedural, chronic condition, and falls prevention episodes. This dramatically reduces the transaction cost of specialist value-based contracting.

Political Context and Administrative Alignment

LEAD is a product of the Trump administration's second-term CMMI agenda, operating under CMS Administrator Dr. Mehmet Oz and CMMI Director Abe Sutton. The model's strategic framing — emphasizing prevention, "healthy living," patient empowerment, consumer choice, and independent practice participation — is directly aligned with the current administration's stated policy priorities. The model's "Healthy Living Strategy" terminology and its explicit focus on making "Americans healthy again" reflect the current HHS leadership's rhetorical framework under Secretary Robert F. Kennedy Jr.

The emphasis on independent, physician-led ACOs (consistent with CBO evidence that physician-led ACOs outperform hospital- or health system-led ACOs), rural and community health center participation, and reduced administrative burden aligns with both the administration's stated skepticism of hospital consolidation and its interest in supporting independent practice. ACO executives should interpret LEAD as a model with strong near-term administrative backing, though the standard CMMI authority to modify or terminate under Section 1115A of the Social Security Act remains in place if established goals are not met.

Market Transformation Implications

For health system CFOs and CMOs evaluating their ACO REACH transition strategy, LEAD offers a direct continuity pathway: ACO REACH participants in PY 2026 are eligible for an abbreviated application that bypasses much of the full application process. This preferential on-ramp is significant — it rewards organizations that built ACO REACH infrastructure and provides competitive advantage in the PY 2027 cohort.

For Medicare Advantage plan strategists, LEAD is operationally significant because it accelerates the shift of Original Medicare beneficiaries into accountable care relationships with capitated payment structures, Part B cost-sharing support, and, by 2029, premium buy-down incentives. These tools narrow the benefit differentiation advantage that MA plans have historically held over Original Medicare FFS. As LEAD ACOs expand their aligned populations and deepen beneficiary engagement tools, they become increasingly competitive with MA for beneficiary retention among the complex, chronically ill populations where MA has historically dominated.

For states evaluating Medicaid integration, the Medicaid Partnership planning phase — running March 2026 through December 2027 — will identify two states for ACO-Medicaid partnership framework development. States not engaged in this process by mid-2026 will be excluded from the initial partnership cohort. This has direct implications for state Medicaid agencies, MCOs, and ACOs operating in states with large dually eligible populations.

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2. Model Architecture and Payment Structure

Participation Structure

LEAD is a nationally available, voluntary model open to ACOs organized as legal entities under applicable state, federal, or tribal law. The model operates on a whole TIN approach — all Medicare-enrolled providers billing under a Participant TIN participate collectively, not selectively at the individual NPI level.

Three provider relationship categories exist within each LEAD ACO:

Role	Alignment Contribution	Quality Reporting	Capitation	CARA Eligible	Shared Savings Eligible
Participant TIN	Yes	Yes	Mandatory	No	Yes
Preferred Provider	No	No	Optional	Yes	Yes

Eligibility minimums are the gatekeeping mechanism for participation. Standard ACOs must maintain at least 5,000 aligned Original Medicare beneficiaries in each Performance Year and demonstrate at least 3,000 claims-based aligned beneficiaries in at least one base year.

Newly Entering ACOs — defined as entities where (1) the ACO has no prior Medicare ACO performance history, (2) fewer than 40% of Participant TINs participated in a Medicare ACO in the past 5 years, and (3) fewer than 50% of Participant Providers participated in a Medicare ACO in the past 5 years — receive lower initial alignment minimums that ramp up over the model period.

High Needs/ESRD-eligible ACOs achieve further reduced minimums if at least 40% of their aligned population falls into the High Needs and/or ESRD beneficiary categories, and if they can demonstrate: (1) 24/7 provider access with EMR access, (2) advanced care planning training, and (3) home-based care delivery capability.

Minimum alignment thresholds by ACO type and year:

PY	Standard ACO Minimum	Standard ACO Base Year Claims Min	Newly Entering ACO Min	Newly Entering Base Year Min	High Needs/ESRD Min	High Needs/ESRD Base Year Min
2027	5,000	3,000	1,000	600	800	500
2028	5,000	3,000	2,000	1,200	1,000	625
2029	5,000	3,000	3,000	1,800	1,200	750
2030	5,000	3,000	4,000	2,400	1,400	825
2031–2036	5,000	3,000	5,000	3,000	1,600	1,000

Governing body requirements include: at least 75% control held by Participant Providers or Preferred Providers or their designated representatives; a medical director who is a licensed Participant Provider physically present at ACO locations; and mandatory beneficiary representation either through a voting seat on the governing body or a consumer advisory committee meeting at least twice per year.

Payment Methodology

LEAD features two risk-sharing tracks:

Feature	Global Risk Option	Professional Risk Option
Upside sharing	Up to 100% of savings	Up to 50% of savings
Downside liability	Up to 100% of losses	Up to 50% of losses
CARA Eligibility	Yes (required for CARA participation)	No
Basis	Total Medicare Parts A & B TCOC	Total Medicare Parts A & B TCOC

Prospective Payment Mechanisms include four options with different participant eligibility:

1. Total Care Capitation (TCC): Population-based prospective payment covering all Medicare Parts A and B services for aligned beneficiaries. Available to Global Risk ACOs.
2. Primary Care Capitation (PCC): Prospective payment covering primary care services only, based on HCPCS codes specified in Appendix D of the RFA. Available to both risk tracks.
3. Non-Primary Care Capitation (NPCC): Covers non-primary care services. Available to Global Risk ACOs.
4. Advanced Payment Option (APO): Additional prospective payment option for ACOs establishing downstream payment arrangements. Available under select conditions.
5. Administrative Add-On: Available to support care coordination infrastructure.

All Participant Providers and Preferred Providers enrolled in prospective payment mechanisms receive a Fee Reduction — a reduction in Medicare FFS payments for covered services furnished to aligned beneficiaries — to offset the prospective payments received.

Benchmarking methodology constructs the Financial Benchmark through a multi-step process:

• Historical Baseline Expenditures are calculated using base year claims data
• A Regional Efficiency Adjustment compares the ACO's historical baseline to average Medicare spending in the ACO's region in Base Year 3, calculated separately for each beneficiary category and combined as a population-weighted adjustment
• Benchmark Adjustments are capped at 3% of risk-standardized USPCC for lower-spending ACOs with prior Shared Savings Program participation within the previous two years; capped at 5% of risk-standardized USPCC for higher-spending ACOs with prior SSP participation
• Benchmarks are trended forward without rebasing for the full 10-year period
• A Retention Incentive and Regional Rate Book Transition apply over the model lifecycle
• Risk score growth cap for High Needs beneficiaries: 3–8%

Quality Withhold: 3% of the Financial Benchmark is held at risk in every Performance Year. ACOs earn back between 0% and 3% based on the Total Quality Score.

Risk mitigation tools include: risk corridors, stop-loss provisions, an Optional Provisional Financial Settlement prior to Final Financial Settlement, a Financial Guarantee requirement (ACOs must demonstrate ability to repay shared losses), and an Extended Repayment Option.

Quality Measures and Performance Requirements

Seven quality measures apply across the model period, phased in as follows:

Measure	PY 2027–2028	PY 2029–2030	PY 2031–2036	Data Source
ACR (All-Condition Readmission)	Pay-for-Performance	Pay-for-Performance	Pay-for-Performance	CMS claims
UAMCC (Unplanned Admissions, Multiple Chronic Conditions)	Pay-for-Performance	Pay-for-Performance	Pay-for-Performance	CMS claims
DAH (Days at Home)	Pay-for-Performance	Pay-for-Performance	Pay-for-Performance	CMS claims
TFU (Timely Follow-Up After Acute Exacerbations)	Pay-for-Performance	Pay-for-Performance	Pay-for-Performance	CMS claims
CAHPS Survey	Pay-for-Performance	Pay-for-Performance	Pay-for-Performance	ACO-contracted vendor
CBP (Controlling High Blood Pressure)	Optional/Bonus	Pay-for-Reporting	Pay-for-Performance	ACO via FHIR API, Excel, or QRDA
GSD (Diabetes: Glycemic Status Assessment >9%)	Optional/Bonus	Pay-for-Reporting	Pay-for-Performance	ACO via FHIR API, Excel, or QRDA

Quality Withhold breakdown by period:

Period	Total Withhold	Per-Measure Weight	P4R Portion	P4P Portion
PY 2027–2028	3%	0.60% per measure (5 measures)	None	3.0%
PY 2029–2030	3%	0.43% per measure (7 measures)	0.86% (CBP + GSD)	2.14%
PY 2031–2036	3%	0.43% per measure (7 measures)	None	3.0%

Scoring architecture:

• ACOs scoring below the 30th percentile on any claims-based measure receive 0 points
• ACOs scoring at or above the 90th percentile receive the full 10 points
• Points scale from 7.5 points at the 30th percentile to 10 points at the 90th percentile in increments across percentile bands
• CAHPS composite uses 8 Summary Survey Measures (SSMs), each scored 0–10, with a scoring floor at the 30th percentile (5.5 points) and ceiling at the 90th percentile (10 points)

Score adjustments to the Initial Quality Score:

• dQM/eCQM Reporting Adjustment (PY 2027–2028 only): Up to +2.50 percentage points (CBP = 1.25 pts, GSD = 1.25 pts) for successful submission; requires at least 75% of eligible beneficiaries reported and minimum 20 eligible cases
• PQP Reporting Adjustment: Up to +5 percentage points in PY 2027–2028; up to +10 percentage points in PY 2029–2036
• CI/SEP Multiplier (beginning PY 2028): Applied to Initial Quality Score — score of +1 to +4 CI/SEP points yields multiplier of 1.0; score of 0 yields 0.90; score of -1 to -4 yields 0.85 (a 15% reduction)
• High Performers Pool (HPP, beginning PY 2028): Funded from 50% of unearned Quality Withholds; distributed proportionally by beneficiary alignment-months to ACOs meeting the 70th percentile average across all measures plus CI/SEP eligibility criteria

Prevention and Quality Plan (PQP): Required annual submission for all LEAD ACOs beginning PY 2027. ACOs choose one of three intervention paths: New Intervention, Existing Intervention, or RISE/CARA Path (available only to Global Risk ACOs participating in CARA's falls prevention episode). Year 1 is a planning year; Year 2 requires active implementation. Year 3 and beyond introduce program engagement accountability thresholds. The pathway selected in Year 1 applies for the model's duration and may only be changed with CMS approval.

Timeline

Date	Event
March 2026	Application portal opens; LOI form released
March–December 2027	Medicaid Integration planning phase (CMS identifies two partner states)
April 9, 2026	RFA Webinar
April 21, 2026	Application Office Hours
May 5, 2026	Alignment and Finance Office Hours
May 17, 2026 (11:59 PM ET)	Application portal closes
September 15, 2026	Implementation Period begins
December 31, 2026	Implementation Period ends; ACO REACH concludes
January 1, 2027	LEAD Model Performance Year 1 begins
2029	CBP/GSD transition to pay-for-reporting; Part D premium buy-down available
2031	CBP/GSD transition to pay-for-performance
December 31, 2036	LEAD Model Performance Period ends

The Implementation Period (September 15 – December 31, 2026) is optional and carries no payment, financial risk, or beneficiary alignment. Its sole purpose is enabling voluntary alignment outreach so ACOs can meet the PY 2027 alignment minimum at model launch. Signing the IP Participation Agreement does not obligate participation in the model period; signing the PY Performance Agreement does.

ACO REACH participants in PY 2026 access an abbreviated application that confirms governance structure, verifies key personnel, and selects model options without completing the full application. Organizations that did not maintain good standing in ACO REACH or carry significant compliance issues must submit a full application or may be deemed ineligible.

CMS has reserved authority to open additional application windows for subsequent Performance Years, with the expectation that early model experience will inform cohort-specific design modifications.