ACO PC Flex (ACO Primary Care Flex) Model

Analysis updated November 9, 2026

Strategic questions for your team

Does our organization qualify as a 'low revenue ACO' under 42 CFR § 425.20, and if we are not already in the Shared Savings Program, can we form and operationalize a compliant ACO structure before the next application window — recognizing that CMS currently does not intend to offer another application round beyond the 2024 cohort, meaning participation may be permanently foreclosed for non-applicants?
Have we modeled the net cash flow impact of replacing fee-for-service billing with a monthly per-beneficiary per-month (PBPM) Prospective Primary Care (PPC) Payment derived from our county's Rate Book — including the CMS-HCC risk adjustment blend (67% V28 / 33% V24 for A&D beneficiaries in PY2026), seasonality adjustments, the operational payment precision withhold, and Medicare sequestration — and does the resulting revenue stream exceed, meet, or fall short of our current primary care FFS collections for the PPCP-eligible population?
What is our projected PPCP-eligible beneficiary count and what share of our assigned panel will be excluded from PPC Payment eligibility due to Step 2 assignment, Medicare Advantage enrollment, Part A-only or Part B-only status, specialist primary providers, Periodic Interim Payment enrollment, or overlap with prohibited capitation-based initiatives such as Kidney Care First, Primary Care AHEAD, or Geo AHEAD — and have we stress-tested revenue projections against a scenario where 20-30% of our attributed panel is PPCP-ineligible?
Are we prepared for the fee reduction mechanism that reduces FFS payments for primary care services delivered to PPCP-eligible beneficiaries — including the specialty-specific carve-outs for specialists performing primary care codes and NPPs in specialty practices — and do we have the billing system infrastructure to operationalize these claim-level reductions accurately, given that PY2025 included a deferral option that expires and full fee reductions apply in PY2026?
Can we absorb and strategically deploy the $250,000 one-time Advance Shared Savings Payment — paid in Q1 2025 — across the permitted expenditure categories (Category 1: Advanced Primary Care; Category 2: Operations) without triggering prohibited uses, and have we built a multi-year repayment model showing how this advance will be deducted from shared savings each performance year through 2029 with any unpaid balance carrying forward, including an early termination scenario that triggers immediate recoupment?
Have we selected the optimal assignment methodology — Prospective Assignment versus Preliminary Prospective Assignment with Retrospective Reconciliation — and do we understand that under Retrospective Reconciliation, any beneficiary who drops to Step 2 assignment in any quarterly update or shifts ACOs loses PPCP eligibility for the entire performance year with recoupment applied, while Prospective Assignment locks eligibility at the start-of-year run with fewer mid-year disruptions?
What is our county's PPC Payment County Base Rate relative to our historical primary care FFS spending per beneficiary, and for providers in our ACO with 'entrenched patterns of inappropriately low spending,' does the county-based rate (rather than our historical experience) create a meaningful payment uplift — and conversely, for high-spending counties, does the Enhancement Amount cap (the limit on the Enhanced PPC Payment Amount updated in the PY2026 Rate Book) constrain our total prospective revenue below current FFS levels?
Do we have sufficient data infrastructure to track care focus determinations (FQHC-focused, RHC-focused, or Other) for each assigned beneficiary at the CCN and TIN/NPI level, support voluntary alignment promotion through MyMedicare.gov to maximize PPCP-eligible months, monitor quarterly assignment runs under Retrospective Reconciliation, and produce the required reporting on permitted uses of PPC Payment funds — including the distinction between Category 1 Advanced Primary Care expenditures and Category 2 Operations expenditures as defined in Appendix A?
Given that CMS currently anticipates the PY2026 Rate Book (based on CY2022-2024 base years with a 1.021 completion factor) will also govern PY2027-2029, and that the model runs through December 31, 2029 with no announced successor model or additional application rounds, what is our five-year financial exit strategy if the model underperforms, and have we modeled early termination scenarios — both voluntary mid-year termination subject to Shared Savings Program financial reconciliation and voluntary end-of-year termination — including the recovery and recoupment of any unrepaid Advance Shared Savings Payment balance?

Traps and concerns

Preliminary-to-Updated Rate Book Guardrail Volatility
CMS released two distinct Rate Books for Performance Year 2025 — a Preliminary Rate Book (base years CY2021–2023, completion factor 1.013) and an Updated Rate Book (base years CY2022–2024, completion factor 1.021) — with materially different National Conversion Factor inputs and GAF Trend Index methodologies. The Updated Rate Book added back alternative payment arrangement adjustments for CAHs, ETA hospitals, and HOPDs that the Preliminary version excluded entirely. A PY2025 Rate Book Guardrail Provision governs which rate applies for payment calculations, but ACOs that built 2025 budgets and staffing plans on Preliminary Rate Book county rates may face significant mid-year revenue variance when the Updated Rate Book rates govern final settlement. ACOs in markets with large CAH or HOPD primary care footprints face the greatest exposure because those institutional claim adjustments were absent from the rate used for initial prospective payments but present in the final settlement rate.
Preliminary Prospective Assignment Retroactive PPCP-Eligibility Wipeout
ACOs electing Preliminary Prospective Assignment with Retrospective Reconciliation face a catastrophic revenue risk: any claims-based beneficiary who drops from Step 1 or Step 3 assignment to Step 2 in any quarterly update — even for a single quarter — loses PPCP eligibility for the entire performance year retroactively, and CMS's recoupment procedure is triggered to recover all PPC Payments already made for that beneficiary. Because assignment is re-run quarterly and beneficiaries can shift assignment steps as their claims patterns evolve, an ACO serving a high-churn or low-continuity population could see substantial mid-year recoupment demands on payments already distributed to participating practices. Unlike Prospective Assignment, where a beneficiary locked in at year-start retains eligibility unless they leave the program entirely, PPARR creates ongoing retroactive exposure throughout the performance year with no mechanism to recover distributed payments from individual provider practices that have already spent the funds.
Fee Reduction Implementation Lag Creates Non-Recoverable PPC Gap
The model's core payment exchange — PPC Payment replaces FFS payments for eligible primary care services via a fee reduction on submitted claims — was delayed for all participants through the entirety of Performance Year 2025. Providers designated as 'fee reduction to-be-determined' who were later confirmed for fee reductions starting July 2025 were ineligible for PPCP for January through June 2025, meaning PPC Payments were not made for their attributed beneficiaries during that period. ACOs that onboarded these providers expecting full-year prospective payments faced a 6-month revenue hole with no retroactive make-whole. More critically, any provider TIN that a PC Flex ACO terminates mid-year causes all beneficiaries with that TIN as their primary supplier to lose PPCP eligibility for all months after the termination effective date — creating an acute revenue cliff for ACOs that lose a key practice mid-year and cannot quickly reassign beneficiaries to remaining PPCP-eligible participants.
Advance Shared Savings Payment Repayment Subordinates Future Shared Savings
The one-time $250,000 Advance Shared Savings Payment paid in Q1 2025 must be repaid by deducting the balance from shared savings earned in each subsequent performance year, with any unpaid balance carrying forward indefinitely across the model's 2025–2029 term. For newly formed ACOs — specifically the low-revenue ACOs this model targets — achieving shared savings in early performance years is uncertain, particularly while absorbing the administrative costs of transitioning to prospective payment. An ACO that fails to generate shared savings in PY2025 and PY2026 carries the full $250,000 liability into later years, compounding against the shared savings threshold requirements of the Shared Savings Program. If the ACO terminates early under a voluntary mid-year termination scenario, CMS's recovery and recoupment procedures apply immediately to the outstanding Advance Shared Savings Payment balance, potentially requiring repayment in a single settlement that new ACOs with limited reserves cannot absorb.
Capitation Overlap Prohibition Silently Strips Beneficiary Eligibility
As of PY2026, beneficiaries assigned to organizations participating in other capitation-based initiatives with prohibited overlap — explicitly including Kidney Care First, the Primary Care AHEAD model, and the Geo AHEAD model — are ineligible for PPCP regardless of their assignment step or voluntary alignment status. This prohibition operates silently: CMS determines overlap at the beneficiary level based on enrollment data, and ACOs receive no advance warning that a specific beneficiary's PPCP eligibility has been voided. ACOs in geographic markets where Primary Care AHEAD or Geo AHEAD have been deployed face systematic population erosion from their PPCP-eligible denominator that cannot be predicted at the time of contracting with participating practices. Because PPC Payments are based on PPCP-eligible beneficiary months, undetected overlap can cause an ACO to distribute payment infrastructure commitments to practices based on projected eligible populations that are materially smaller in practice, with recoupment triggered for any months already paid for newly-excluded beneficiaries.
CMS-HCC Risk Model Transition Distorts Individual Payment Calculations
For PY2025, A&D beneficiary risk scores used in the per-beneficiary PPC Payment calculation reflect a blend of 67% V28 and 33% V24 CMS-HCC model weights. For PY2026 and subsequent years, the blend and applicable model versions are updated, as explicitly noted in the PY2026 Financial Paper. Because the PPC Payment is risk-adjusted at the individual beneficiary level — with each beneficiary's monthly payment directly scaled by their risk score relative to the county base rate — a change in model blend mid-model can materially alter payment amounts for beneficiaries with complex chronic conditions or behavioral health comorbidities that are coded differently across V24 and V28. ACOs that built financial models projecting beneficiary-level PPC Payments using a fixed risk adjustment assumption will see revenue variance at settlement that is impossible to predict without replicating CMS's exact blending methodology. Additionally, ESRD beneficiaries use the 2023 prospective CMS-HCC ESRD model (V24-based), creating a separate risk calibration track that ACOs with significant ESRD populations must manage distinctly from their A&D payment projections.
Restricted Permitted Use Categories Expose ACOs to Clawback on Innovation Spending
CMS mandates that PPC Payment funds and the Advance Shared Savings Payment be used exclusively within defined expenditure categories (Appendix A): Category 1 covers Advanced Primary Care Expenditures, Category 2 covers Operations Expenditures, and Category 3 is explicitly Prohibited Uses. The financial paper specifies that CMS retains monitoring authority to ensure compliance with permitted use requirements, and non-compliant expenditures create repayment liability. ACOs that use PPC Payment funds to subsidize specialist services, facility overhead not directly tied to primary care operations, or any Category 3 prohibited use — even inadvertently through shared cost allocation across a health system — face retroactive repayment demands. Low-revenue ACOs new to value-based contracting often lack the internal accounting infrastructure to maintain clean categorical separation between primary care and non-primary care expenditures within a shared physician group or health system billing environment, making unintentional compliance violations a material operational risk with direct financial consequences at settlement.