McDermott+ is pleased to bring you Regs & Eggs, a weekly Regulatory Affairs blog by Jeffrey Davis. Click here to subscribe to future blog posts.
December 5, 2024 – Decisions, decisions, decisions. The Centers for Medicare & Medicaid Services (CMS) under the Trump Administration will have its hands full making decisions about Center for Medicare and Medicaid Innovation (CMMI) models throughout 2025 and into 2026.
Last week, right before Thanksgiving, CMMI finalized the second mandatory payment model under the Biden Administration that impacts hospitals: the Increasing Organ Transplant Access (IOTA) Model. This six-year model will require participation from 102 hospitals across the country and is set to begin on July 1, 2025. The other mandatory model, the Transforming Episode Accountability Model (TEAM), is scheduled to start on January 1, 2026.
These two models could proceed without any modifications or delays, or the Trump Administration could halt them before they begin. While CMMI under the first Trump administration did test some mandatory payment models, those models were fully developed by that Administration. The first Trump Administration canceled the mandatory value-based payment programs for hip fractures and cardiac care that the Obama Administration had established and scheduled to start in January 2018. The incoming Trump Administration could similarly be wary of proceeding with mandatory models developed by the outgoing Biden Administration. We will closely monitor the incoming Trump Administration’s decisions regarding TEAM and the IOTA Model in the months ahead.
Another pending CMS decision on the minds of many in the health policy community is what the agency will do once the Accountable Care Organization Realizing Equity, Access and Community Health (ACO REACH) Model ends on December 31, 2026. On November 8, 2024, CMS released 2023 performance results for the model, which could help inform CMS’s decision-making process under the next administration. To help me describe the importance of this model, highlight the performance results, and discuss what CMS could do in both the short and long term, I’m bringing in my colleague Simeon Niles.
As noted in a previous Regs & Eggs blog post, CMMI under the Biden Administration established a strategical goal to get 100% of Medicare beneficiaries into an accountable care relationship by 2030. Boosting participation in ACO initiatives, such as the ACO REACH Model, is critical to meeting that goal. The ACO REACH Model represents a transformative approach to accountable care, blending innovation, equity, and sustainability within the Medicare fee-for-service framework. Building on lessons from prior initiatives, such as the Next Generation ACO Model and the Medicare Shared Savings Program (MSSP), ACO REACH offers organizations greater flexibility to assume financial risk while delivering coordinated care. While the first Trump Administration initially designed and tested the Global and Professional Direct Contracting (GPDC) Model, which operated from 2020 to 2021, the Biden Administration reshaped the model into its current state to place a greater emphasis on health equity. ACO REACH requires participants to address disparities within their patient populations, and CMS provides robust incentives to serve underserved communities, such as an increase in the benchmark for participating ACOs serving higher proportions of underserved beneficiaries.
ACO REACH accommodates diverse organizational structures through its three ACO categories:
This tiered approach enables ACO REACH to attract participants with varying levels of experience, with the aim of ensuring an inclusive and adaptive model. Participants also must choose between two risk-sharing arrangements:
To maintain financial accountability, CMS applied a 3% discount to benchmarks under the Global Option in 2023 and 2024. This discount will increase to 3.5% in 2025 and 4% in 2026.
In 2023, the ACO REACH Model included 132 ACOs managing care for more than two million Medicare beneficiaries and overseeing $26.6 billion in Medicare Parts A and B expenditures. These beneficiaries were predominantly aligned to Standard ACOs (95%), reflecting the robust infrastructure and experience of these organizations.
ACO Composition and Beneficiary Distribution
ACOs ranged in size from about 600 beneficiaries to more than 100,000 beneficiaries aligned. Average ACO size tended to reflect the complexity of the beneficiary population and the ACO’s experience with taking on risk. REACH ACOs included:
More than 80% of REACH ACOs chose the Global Option risk-sharing arrangement, signaling confidence in assuming full accountability for savings and losses.
Financial and Quality Performance
The ACO REACH Model demonstrated its potential to reduce healthcare costs while maintaining quality. REACH ACOs averaged $6.82 million in net savings per ACO (with individual ACOs ranging from $44 million in net losses to more than $116 million in net savings). REACH ACOs had an average net savings rate of 4.1% (with individual ACOs ranging from about -15% to 25%). Standard ACOs achieved an average net savings rate of 2.8%, New Entrant ACOs achieved an average net savings rate of 4.6%, and High Needs ACOs achieved an average net savings rate of 13.2%. These figures demonstrate wide variability in performance among REACH ACOs.
Quality performance, measured through the Total Quality Score (TQS), was strong across ACOs. The TQS reflects the portion of the 2% quality withhold ACOs can earn back by meeting rigorous quality standards. The average TQS for all REACH ACOs is 79.4%. High Needs ACOs excelled with an average TQS of 86.7%, underscoring their expertise in managing complex populations.
As the ACO REACH Model approaches its planned conclusion in 2026, stakeholders are advocating for its continuation or evolution. We noted in our previous blog post that stakeholders formally asked CMS to develop a higher risk track within the MSSP to accommodate high-performing ACOs once the ACO REACH Model ends. Despite this input from ACOs, CMS has not yet committed to a path forward. As we stated in our blog post, the lack of a concrete policy means that ACOs currently participating in ACO REACH must wait a bit longer for more definitive guidance on how they can continue to align their efforts and maximize their return on investment. Without clarity on what to expect in future rulemaking, these organizations believe that they will be unable to effectively plan how to appropriately target their resources, risking potential setbacks in strategic investment and long-term care redesign.
The question we now have is whether the new performance results provide clarity on what CMS could do next.
The answer to that question is potentially yes. The model’s success and design elements align with bipartisan priorities, offering a foundation for future Medicare reforms.
If the model, or a version of it, aligns with the incoming Trump Administration’s priorities, CMS does not have to wait long to act. It could take the following initial steps in the near future to provide REACH ACOs with the clarity that they seek:
Eventually, the Trump Administration could decide to incorporate elements of the model into the MSSP and ensure an ongoing pathway for REACH ACOs that want to take on full financial accountability. For example, CMS could retain and expand on the policy of beneficiary-level adjustments to ACO benchmarks, focusing on dual eligible status (beneficiaries enrolled in both Medicare and Medicaid) and rural residency. Nonetheless, the actions highlighted above could be intermediary steps to help ACOs manage during any transitional period.
It remains to be seen what the Trump Administration will do with the ACO REACH Model. Until that decision is made, advocates of the model will continue to argue that ACO REACH exemplifies how value-based care can transform the healthcare system, ensuring better outcomes for beneficiaries while maintaining sustainability for providers. They believe that its success could therefore offer a roadmap for advancing Medicare reforms in a way that prioritizes innovation and choice.
Until next week, this is Jeffrey (and Simeon) saying, enjoy reading regs with your eggs.
For more information, please contact Jeffrey Davis. To subscribe to Regs & Eggs, please CLICK HERE.
