Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH)

Strategic questions for your team

Given that ACO REACH's Global risk option exposes participants to 100% of savings AND losses against a prospective benchmark — with an average PBPM benchmark of approximately $1,361 in PY 2025 and total dollars under risk exceeding $35.5 billion across 100 ACOs — does our organization have sufficient capital reserves, actuarial modeling capability, and stop-loss arrangements to absorb potential downside scenarios, particularly given that 17% of PY 2024 ACOs accrued net losses?
ACO REACH is closed to new applicants for its remaining duration through PY 2026, and CMS has not announced a successor model — so what is our strategic path to maintaining or growing a value-based care revenue stream post-2026, and does participation in an existing REACH ACO as a Participant or Preferred Provider serve as a viable bridge strategy while we monitor CMMI's next advanced ACO initiative?
Participant Providers in ACO REACH are required to participate in capitation at 100% claims reduction in PY 2025, meaning providers must forgo 100% of applicable FFS payments in exchange for ACO-distributed compensation — do our employed or contracted physicians, specialists, and facilities have the contractual flexibility, cash flow tolerance, and trust in ACO distributions to accept this payment restructuring, and have we modeled the working capital impact of the transition from FFS receipts to capitation disbursements?
PY 2024 evaluation data show that Standard ACOs achieved only a 4.2% net savings rate while High Needs ACOs achieved 14.0% and New Entrant ACOs achieved 8.6% — given our patient population's complexity profile, dual eligibility prevalence, and chronic disease burden, which ACO track (Standard, New Entrant, or High Needs) best aligns with our beneficiary mix, and do we meet the minimum alignment thresholds (5,000 beneficiaries for Standard, 2,000 for New Entrant rising to 5,000 by PY 2026, and 500 for High Needs rising to 1,250 by PY 2026)?
The PY 2024 fact sheet shows that 96 of 115 ACOs (83%) earned net savings, with the PY 2021 cohort — the most experienced participants — generating $758.5 million in net savings at a 6.5% net savings rate compared to 2.4% for PY 2023 entrants, and per-beneficiary-per-month gross savings increased 24% year-over-year to $88.04 — what is our realistic savings ramp timeline given our starting experience level, and have we stress-tested our financial projections against the more conservative evaluation methodology (which showed net spending increases for Standard ACOs cumulatively through PY 2023) rather than relying solely on benchmark-relative results?
The quality withhold mechanism ties a portion of the performance year benchmark to ACO performance on claims-based measures including ACR (all-condition readmission), UAMCC (unplanned admissions for patients with multiple chronic conditions), and TFU (timely follow-up after acute exacerbations), with the High Performers Pool offering additional shared savings bonuses to ACOs meeting CI/SEP criteria and achieving at or above the 70th percentile — do we have the data infrastructure, care management workflows, and attribution tracking systems needed to consistently perform above baseline on these measures, and can we achieve the PY 2024 model average TQS of 80.4% or the 100% TQS achieved by 21 of 115 ACOs?
The evaluation found that individual and medical group practice ACOs achieved greater gross spending reductions than IDS/hospital system ACOs — which the report attributes to hospital systems' inherent financial incentives to maintain inpatient and outpatient volume — so if our organization is a hospital or health system, have we honestly assessed whether our internal economics and physician compensation structures create structural conflicts with ACO REACH's incentive to reduce acute care utilization, ED visits, and post-acute spending, and do we have governance mechanisms to override volume-based institutional incentives?
ACO REACH permits participants to elect benefit enhancements including the SNF 3-Day Rule Waiver, Home Health Homebound Waiver, post-discharge home visits, care management home visits, telehealth, and concurrent hospice care, plus beneficiary engagement incentives such as Part B cost-sharing support and chronic disease management rewards — and PY 2026 adds a Substance Access BEI allowing consultation on eligible hemp products (at participant expense, in legally permissive states) — have we evaluated which benefit enhancements would most effectively reduce avoidable utilization and improve UAMCC and TFU scores for our aligned population, and have we budgeted for the operational cost of deploying these waivers at scale?
The evaluation identified that approximately 75% of ACOs in PY 2023 worked with a Management Services Organization (MSO) in some capacity — as lead organizations, vendors, or administrative partners — providing population health analytics, actuarial support, care management infrastructure, and financial modeling, and that MSO-led ACOs often achieved stronger implementation of accountable care functions — do we have the internal population health management infrastructure (risk stratification tools, ADT feeds, care gap analytics, provider engagement platforms) to operate competitively without an MSO, or should we partner with one, and if so, how do we evaluate MSO fee structures against projected shared savings?
Safety net facility participation in ACO REACH more than doubled from 420 in PY 2022 to 871 in PY 2023 (FQHCs, RHCs, and CAHs), and 41% of ACOs cited serving medically underserved beneficiaries as their primary motivation for joining the model — does our ACO's provider network include adequate safety net and community-based providers to serve dual-eligible and high-social-risk beneficiaries, and have we accounted for the evaluation's finding that beneficiaries in under-resourced areas (measured by Area Deprivation Index) may initially show increased utilization as previously unmet needs are addressed, temporarily inflating costs before savings materialize?

Traps and concerns

Benchmark Methodology Volatility and Settlement Lag
ACO REACH uses a multi-layered benchmark construction that includes retrospective trend adjustments (RTA), Significant/Anomalous/Highly Suspect (SAHS) billing adjustments, and skin substitute billing exclusions — none of which are reflected in quarterly monitoring data. The PY 2025 Transparency Report explicitly warns that Q1–Q3 savings estimates are 'overstated due to seasonality and lack of claims runout,' and that skin substitute expenditures comprised an estimated 2.8% of PY 2025 ACO REACH total expenditures (12.6% for High Needs ACOs specifically). ACOs that budget and distribute capitation payments based on provisional settlement snapshots risk significant cash flow disruption when final settlement figures diverge — potentially by hundreds of basis points. The PY 2021 Cohort's outsized influence (53% of total ACO savings in PY 2024, generating $758.5 million net savings at a 6.5% net savings rate versus only 2.4% for PY 2023 cohort) demonstrates how cohort vintage and experience dramatically shape financial outcomes in ways difficult to forecast mid-year. ACOs electing Global (100%) risk must further internalize that 95% of CMS's PY 2024 net savings were captured through the automatic 3% discount on benchmarks — meaning the model is structurally designed to ensure CMS savings before ACO savings are shared.
Net vs. Gross Savings Gap Erodes ACO Economics
The evaluation methodology (NORC DID analysis) and the financial settlement benchmarks produce systematically different savings estimates, and the evaluation findings are 'typically more conservative.' In PY 2024, while ACOs generated $2.511 billion in gross savings (6.7% gross savings rate), net savings to CMS were only $988.3 million (2.6%) and net savings to ACOs were $1.522 billion (4.2%). Critically, the independent NORC evaluation found that after factoring in payouts to REACH ACOs and the comparison groups, net Medicare spending actually increased for Standard ACOs cumulatively as of PY 2023 — meaning the model generated gross savings against benchmarks but increased total Medicare outlays relative to what would have occurred absent the model. High Needs ACOs showed significant increases in net spending in both PY 2022 and PY 2023 on an evaluation basis. ACO leaders who evaluate participation viability using internal settlement reports rather than independent evaluation methodology risk misunderstanding their true cost-of-care performance and making misguided investment decisions in care management infrastructure.
Capitation Claims Reduction Ratchet Creates Provider Network Fracture
ACO REACH has incrementally mandated higher minimum Primary Care Capitation (PCC) claims reduction percentages from Participant Providers — escalating from 1–100% permissible in PY 2021, to 5–100% in PY 2022, 10–100% in PY 2023, 20–100% in PY 2024, and 100% in PY 2025. By PY 2025, all Participant Providers were required to accept full (100%) claims reduction, meaning they receive zero direct FFS payment from CMS and are entirely dependent on the ACO for compensation. While historically approximately 90% of capitation dollars have been spent on Medicare Covered Services, this ratio fluctuated to only 87.33% in Q1 PY 2025 before recovering to 97.55% by year-end. For providers unaccustomed to capitation — particularly independent physicians and small practices who constitute the majority of Participant Providers across the model's 133,288 PY 2023 providers — this represents a fundamental cash flow transformation. Providers who signed multi-year participation agreements without fully modeling the ratcheting claims reduction schedule may face payment shortfalls, creating network stability risk precisely when ACOs need care coordination continuity. The evaluation notes that ~8% of ACOs exited the model mid-PY 2023, with exiting ACOs citing 'financial losses and unexpected differences between ACO REACH and other ACO models' as primary drivers.
MSO Governance Concentration and Fiduciary Conflict
In PY 2023, over one-third of REACH ACOs were led by Management Services Organizations (MSOs), and approximately 75% of all ACOs worked with an MSO in some capacity as vendors, partners, or administrative support entities. MSOs led nearly half of ACOs entering the model in PY 2023. This concentration creates compounded regulatory risk: MSOs that simultaneously lead ACOs and serve as vendors to those same ACOs face potential self-dealing conflicts in shared savings distribution, capitation payment allocations, and vendor contract negotiations — all subject to CMS monitoring under the model's enhanced vetting and program integrity requirements. CMS specifically redesigned ACO REACH from GPDC to include 'greater participant vetting, monitoring, and transparency to protect patients and the model' and requires beneficiary advocates on governing boards. Under the Trump administration's DOGE-driven regulatory scrutiny and CMS Administrator Dr. Oz's focus on fraud and waste, ACOs with opaque MSO governance structures or related-party transactions face elevated audit risk. Financial losses attributable to MSO administrative fees that reduce ACO shared savings available to providers could also trigger provider defection and downstream beneficiary alignment loss.
Substance Access BEI State-Law Patchwork Compliance Trap
Beginning PY 2026, ACO REACH introduced the Substance Access Beneficiary Engagement Incentive (BEI), allowing participants to consult with aligned beneficiaries about eligible hemp products. The implementation and dispensing costs are borne entirely by the ACO — CMS explicitly will not cover product costs — and the BEI is only available in states where eligible hemp products are considered legal. This creates a multi-layered compliance hazard: ACOs operating across multiple states (the PY 2023 participant list shows most large ACOs spanning 5–20+ states) must implement state-specific eligibility determinations for every beneficiary interaction involving this BEI, as hemp legality varies at the state level and can shift with legislative changes. ACOs that inadvertently offer or document Substance Access BEI consultations with beneficiaries in non-eligible states risk program integrity violations under CMS's 'strict program integrity safeguards' — which the agency has explicitly flagged as a protection against 'program or patient abuse.' Additionally, liability exposure exists if hemp products dispensed under this BEI interact adversely with Medicare-covered medications, creating a direct financial and reputational risk for ACOs that implement the BEI without robust state-law tracking infrastructure and clinical contraindication screening protocols.
Beneficiary Alignment Attrition Distorts Financial Benchmarks Mid-Year
ACO REACH benchmarks are set prospectively based on aligned beneficiary populations, but actual alignment fluctuates continuously through both voluntary and claims-based mechanisms. The Transparency Report discloses that 29 ACOs terminated from the model after the PY 2025 Participant List was published in late January, reducing the active ACO count from the published 129 to 100. The model's average aligned beneficiary population fell from approximately 2,376,618 in PY 2024 to 2,176,122 by Q4 PY 2025. ACO participation shrank from 132 ACOs in PY 2023 to 115 in PY 2024 and 100 in PY 2025. At the beneficiary level, claims runout lags mean that IBNR (incurred-but-not-reported) adjustments applied to quarterly capitation calculations are described as 'often unreliable.' ACOs that lose high-cost beneficiaries mid-year after benchmark-setting — or gain them through voluntary alignment without corresponding benchmark recalibration — face adverse selection risk that is not fully corrected until final settlement. High Needs ACOs are particularly exposed: their benchmarks depend on complex HCC-based eligibility criteria (requiring risk scores ≥3.0, specific SNF utilization of minimum 45 days, or home health ≥90 days), and misclassification or eligibility status changes mid-year can materially alter both the benchmark and the quality comparison population.
IDS/Hospital System ACO Structural Incentive Misalignment
The NORC evaluation identifies a persistent structural hazard for Integrated Delivery System (IDS) and hospital system-led ACOs: their internal economics are designed to maximize hospital-based inpatient and outpatient volume as a revenue driver, which directly conflicts with ACO REACH's core savings mechanisms of reducing acute care utilization and shifting care to lower-cost settings. The evaluation found that IDS/hospital system ACOs experienced increases in ED and post-acute care (PAC) utilization and spending cumulatively as of PY 2023, while individual and medical group practice ACOs generated greater gross spending reductions. The evaluation notes the hypothesis that 'IDS/hospital system ACOs' overarching incentive structures designed to increase hospital-based inpatient and outpatient care' systematically undermine savings generation. For ACOs in the Global (100%) risk option — 103 of 122 PY 2024 ACOs elected Global risk — IDS-led entities that increase acute care utilization absorb 100% of losses against benchmark rather than the 50% borne under Professional risk. With the per-beneficiary-per-month benchmark averaging approximately $1,361 in PY 2025 across $35.5 billion in total dollars under risk, even a 1–2 percentage point overrun relative to benchmark across a large IDS ACO translates to tens of millions in financial losses, compounded by the structural 3–3.5% discount applied to Global risk benchmarks before savings calculations begin.