ACO REACH Is Here! How Will It Impact Your Value-Based Care Strategy?

Understanding the Transition: ACO REACH Replaces Current Direct Contracting Model

On February 24, 2022, the Center for Medicare & Medicaid Innovation (CMMI) announced the ACO REACH (Realizing Equity, Access, and Community Health) Model, with an application period ending April 22, 2022. ACO REACH will replace the current Direct Contracting Model (DC) on January 1, 2023, as the highest level of risk/reward total cost of care model option for Medicare fee-for-service (FFS).

The current DC model drew heavy scrutiny from certain stakeholders pointing to the potential of privatizing Medicare for profit, mostly because of the type of organizations participating in DC to date. ACO REACH corrects some of those concerns by retaining the underlying DC structure while changing the governing body requirements, adjusting financial mechanisms (quality withhold and the discount in global) as well as bringing a benchmark adjustment for health equity.

What is the ACO REACH Model?

The ACO REACH Model is an accountable care organization (ACO) model that builds upon the Next Generation ACO, Medicare Shared Savings Program (MSSP) and Medicare Advantage (MA), serving as the highest risk/reward ACO model for Medicare FFS. The application period for a January 1, 2023, start has already opened and will run until April 22, 2022. Existing Direct Contracting Entities (DCEs) may participate without reapplication. Previously, new applications for Direct Contracting were suspended, leaving organizations without the ability to directly enter the model. This presents a new opportunity for those interested in the alternative payment mechanisms, level of risk and incentives provided under DC and now ACO REACH.

Is ACO REACH Direct Contracting in disguise? What are the differences?

There are more similarities than differences when comparing ACO REACH to Direct Contracting. First, the underlying structure remains intact, including the attribution methodology, risk tracks, quality metrics and baseline years for the benchmark. And just like Direct Contracting, it requires some level of capitation, making this an innovative and disruptive model that creates novel incentives for change. However, ACO REACH participating providers cannot participate with certain other alternative payment models including MSSP and Primary Care First (PCF).

Along with these structural similarities, there are several important differences. At a high level, the ACO REACH model puts a much stronger emphasis on provider-led organizations with a new governance structure requiring at least 75% of an ACO’s governing body to be controlled by participating providers—compared to Direct Contracting’s 25% requirement. And there’s a clear message that specialty care providers with another alternative payment option should not apply.

Other notable changes include a reduced discount for the Global track (maxed at 3.5% rather than 5% in Direct Contracting) and a reduced quality withhold (2% rather than 5% in Direct Contracting).

What’s unique about the ACO REACH Model?

One of the most unique components of the ACO REACH Model is the focus on health inequities. There are multiple new provisions that keep the focus on beneficiaries in underserved communities who haven’t had the opportunity to get optimal care. The ACO REACH model takes a more rigorous approach with these new requirements and incentives:

  • Health Equity Plans: New requirement for ACOs to develop and submit a formalized plan
  • Benchmark Adjustments: A potential adjustment to the Performance Year benchmark for ACOs serving patients in the most underserved communities (determined by the Area Deprivation Index and Dual Eligible status)
  • Beneficiary Engagement Incentives and Beneficiary Enhancements: Continued flexibilities and engagement incentives for beneficiaries encouraging better management of chronic conditions and reduced readmissions
  • Required Demographic Data Collection: Additional requirement to capture and report demographic data that tie to social determinants
Is the ACO REACH Model a good fit for my organization?

With CMMI’s goal of aligning all Medicare and Medicaid beneficiaries to an ACO by 2030, ACO REACH and MSSP are the two options available. While they are both ACO models, they are strikingly different in their structure, risk tracks and incentives. At the most basic level, MSSP serves as “training wheels” for managing population risk and learning the ropes of value-based care. ACO REACH, on the other hand, offers advanced levels of risk, alternative payment mechanisms for managing the network that are more similar to a health plan and movement toward Medicare Advantage in many (but not all) aspects. A detailed financial analysis of the programs is recommended along with assessing the infrastructure, provider network and overall preparedness for managing populations.

What are my next steps?

New models like ACO REACH are complex, but Sg2’s expertise—and experience—in value-based care can help your organization develop your enterprise value-based care strategy.

Our alternative payment model experts use extensive research to advise you on the right programs to participate in, and then help facilitate successful implementation of these programs.

Watch our Educational Web Series to learn more about various aspects of ACO REACH, including risk sharing and payment mechanisms, benchmarking methodology, health equity changes and ACO REACH vs MSSP, and reach out to us for more information or to speak with an Sg2 value-based care expert.

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