Locke Lord QuickStudy: Centers for Medicare and Medicaid ‎Innovation Announce New ‎‎“ACO REACH” Model to ‎Replace ‎Medicare Direct ‎

Locke Lord LLP
April 11, 2022

On February 24, 2022, the Centers for Medicare & Medicaid Services (CMS) announced that it had redesigned the Global and Professional Direct Contracting Model for 2023. The Center for Medicare and Medicaid Innovation (Innovation Center) has released a Request for Applications (RFA) to solicit a cohort of participants for the new version of Direct Contracting, which will be called the Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (“REACH”) Model. The Direct Contracting model will be renamed the ACO REACH model to better align the model’s name with its purpose: to encourage health care providers to coordinate care to improve the care offered to people with Medicare – especially those from underserved communities. The RFA is available here and more information is available here.

CMS also plans to release more information on current Medicare Direct model participants and to increase monitoring the performance of contracts under both the 2022 model and the ACO REACH Model. The new cohort of contractors will begin participation in the ACO REACH Model on January 1, 2023. Current Direct Contracting Model participants must agree to meet all the ACO REACH Model requirements by January 1, 2023 to continue participating.

Additionally, CMS announced the permanent cancelation of the Geographic Direct Contracting (Geo) Model. The Geo Model was announced in December 2020, was paused in March 2021, and is being canceled.

A comparison table of ACO REACH and Direct Contracting Models is available on the CMS website.

Background on Medicare Direct Contracting

The Direct Contracting Model is a voluntary Accountable Care Organization (ACO) model administered by CMS using contracts with Direct Contracting Entities. The Direct Contracting Model changes financial incentives to reward high quality care while allowing patients to remain in original Medicare.

The Direct Contracting Model also aims to improve beneficiaries’ experience of care. Beneficiaries may be aligned to an entity participating in the model if they choose (or already have) a primary care doctor who is part of a Direct Contracting Entity participating in the model. Beneficiaries maintain the right to opt out of model-related aspects of care and can elect to see any provider they choose without being restricted to a network. Beneficiaries aligned to DCEs participating in the Direct Contracting Model may benefit from aspects of the model such as increased access to telehealth and in-home skilled care for beneficiaries who are not otherwise eligible for home health services. All beneficiaries who are aligned to a DCE in the Direct Contracting model remain in Original Medicare and retain all of their rights and privileges, including the freedom to see any Medicare provider. By tying payments to improvements in the quality of care provided, health care providers are incentivized to collaborate across multiple treatment plans, spend more time with patients with complex, chronic conditions and ultimately, improve patient health outcomes.

There are two voluntary risk-sharing options under the Direct Contracting Model. In each option, participating providers accept Medicare claims reductions and agree to receive at least some compensation from their DCE.

  1. Professional. A lower risk-sharing arrangement—50% savings/losses—with one payment option for participants: Primary Care Capitation Payment, a risk-adjusted monthly payment for primary care services provided by the DCE’s participating providers. Other providers can continue receiving payment on a fee-for-service basis.
  2. Global. A higher risk sharing arrangement—100% savings/losses—with two payment options: Primary Care Capitation Payment or Total Care Capitation Payment, a risk-adjusted monthly payment for all covered services, including specialty care, provided by the DCE’s participating providers.

CMS’ Principles for Accountable Care

In its announcement, CMS stated that the goals of the redesigned ACO REACH Model are to improve quality of care and care coordination for patients in traditional Medicare, especially for patients in underserved communities. CMS stated that the ACO REACH Model provides tools and resources to empower doctors and other health care providers to achieve these goals. This approach affords patients greater individualized attention to their specific health care needs while preserving choice of providers and all other services and flexibilities in Traditional Medicare.

According to CMS, ACO REACH will enable CMS to test an ACO model that can inform the Medicare Shared Savings Program and future models by making important changes to the Medicare Direct Model in three areas.

  1. Health Equity and Underserved Communities. The ACO REACH Model will focus on bringing the benefits of accountable care to Medicare beneficiaries in underserved communities. CMS will use a new payment mechanism to support care delivery and coordination for patients in underserved communities and will require that all model participants develop and implement a health equity plan to identify underserved communities and implement initiatives to measurably reduce health disparities within their beneficiary populations. CMS will introduce a “health equity benchmark” and a benefit enhancement to increase the range of services to be offered by nurse practitioners.
  2. Provider Governance. The ACO REACH Model will require that at least 75 percent control of each ACOs governing body must be held by participating providers or their designated representatives, compared to 25 percent in the Medicare Direct Model. In addition, the ACO REACH Model goes beyond prior ACO initiatives by requiring at least two beneficiary advocates on the governing board (at least one Medicare beneficiary and at least one consumer advocate), both of whom must hold voting rights.
  3. Increased Participant Vetting, Monitoring, and Transparency. CMS will require additional information on applicants’ ownership, leadership, and governing board to gain better visibility into experience in health care delivery, ownership and financial interests, and affiliations to ensure participants’ interests align with CMS’ vision. CMS says that it will employ increased up-front screening of applicants, monitoring of participants, and greater transparency into the model’s progress during implementation, even before final evaluation results, and will share more information on the participants and their work to improve care. Applicants will need to demonstrate a record of serving underserved communities with positive quality outcomes. The ACO REACH Model will include stronger limitations on inappropriate coding and risk score growth, including a new “Risk Score Growth Cap that will measure use changes in the demographics of the underlying population as opposed to increases in HCC coding.

The ACO REACH Model will offer two voluntary risk sharing options: (1) Professional Option (‘Professional’), a lower-risk option with 50 percent Shared Savings/Shared Losses and Primary Care Capitation Payment; and (2) Global Option (‘Global’), a full risk option with 100 percent Shared Savings/Shared Losses and either Primary Care Capitation Payment or Total Care Capitation Payment. CMS will adjust the discount rate for Global risk contracts to 3-3.5% starting in payment year 2023, which should make ACO REACH more attractive than Medicare Direct for contractors that take global risk.

The ACO REACH Model will also allow participation by three different participant types: (1) Standard ACOs for organizations with substantial experience serving people with Traditional Medicare; (2) New Entrant ACOs for organizations with less experience serving the Traditional Medicare population; and (3) High Needs Population ACOs, for organizations that serve small Traditional Medicare populations with complex health care needs.

Current Medicare Direct Model participants must agree to meet requirements for the ACO REACH Model by January 1, 2023 in order to continue their participation.

Increased Transparency

In order to increase transparency, CMS is will be releasing more information about the Medicare Direct Program for the remainder of 2022 and plans to do the same with ACO REACH. For Medicare Direct, CMS is sharing information at the participant level, including:

  • Type of entity (Standard, New Entrant, High Needs),
  • Risk-sharing arrangement (Global or Professional)
  • Payment option (Primary Care Capitation, Total Care Capitation, Advanced Payment),
  • Benefit enhancements and beneficiary engagement incentives they have elected to use (e.g., care management home visits to prevent hospitalization, waiver of the Medicare homebound requirement for access to home health services, Part B cost sharing support),
  • Organization website, and
  • Core service area.

See here for a link to this information.

CMS will also share aggregate information for the Model, including the number of aligned beneficiaries, and information on quality and financial performance based on operations and actuarial data, not the model’s evaluation, which will be updated quarterly. It is important to note that the quality information presented is limited to two claims-based measures—All Condition Readmissions and Unplanned Admissions for Patients with Multiple Chronic Conditions. In addition, information will be shared on the payments being made to model participants on a quarterly basis. Data for additional quality measures may be provided when information becomes available. Independent evaluation results for the ACO REACH model will be posted by CMS when available.

Entities that are now participating in Direct Contracting will need to convert to the ACO Reach model in 2023 with applications for existing contractors and new applicants will be available in spring of 2022. The ACO Reach Model will continue through payment year 2026. Participants in the current model include health systems, managed care organizations, and medical practice management companies.

For more information contact David Szabo or your Locke Lord attorney.