LEAD: Key Changes for ACOs to Understand in the New CMS Model Launching Next Year

The Centers for Medicare and Medicaid Services (CMS) announced that the existing ACO REACH (Realizing Equity, Access, and Community Health) program will end this year, and a new program will kick off on January 1, 2027: Long-Term Enhanced ACO Design (LEAD). Any time CMS announces a new model, it’s critical for organizations to understand the potential benefits and impacts, especially when the new model is intended to replace an existing value-based care (VBC) program.

Here are three key takeaways from the recent LEAD announcement that we want to highlight.

1: The new financial benchmarking methodology aims to enhance predictability and improve on ACO REACH. 

CMS is changing the benchmark methodology with the goal of creating a model that is attainable, more predictable, and closer to MSSP’s financial methodology than ACO REACH.

Major highlights include:

• 10-year performance period with no rebasing

• Benchmark that blends prospective trend factors plus observed national and regional spend

• Different, and more attainable, benchmarks for ACOs that start as higher spend organizations, and ACOs that have historically demonstrated the ability to deliver care below regional averages

• Transitioning to a standardized rate book with less reliance on historical performance 

Aligning incentives to regional cost comparisons could be transformative in keeping organizations focused on cost control and quality performance. The more predictable growth rate trend, coupled with the regional book rate, eliminates much of the uncertainty in prior models, which is positive for all ACOs involved.

However, CMS is not abandoning the REACH methodology entirely. LEAD maintains the two major capitated elements in REACH:

• Primary Care Capitation (PCC), a monthly capitation for primary care services delivered by the ACOs participant primary care providers and preferred specialist providers 

• Total Care Capitation (TCC), which capitated all Medicare Part A and B payments delivered by the ACOs Participant primary care providers and preferred specialist providers

Further, CMS will continue to give PCC ACOs the option of additional capitated services, including:

• Non-primary Care Capitation (NPCC), a monthly capitated payment covering non primary care services, which is not reconciled on a FFS basis

• Advanced Payment Option (APO), an optional capitated payment for nonprimary care services that is reconciled against FFS billing

• Add-on Capitated Payments, available for ACOs with higher-than-average spending that they can use to invest in primary care and other services expected to lower costs over time (these payments are not included in the reconciliation of shared savings or losses)

Navigating the maze of capitation options and models — on top of the inherent challenges in transitioning from a fee-for-service payment model to advanced alternative payment models like these — gets easier when you have payment technology designed for value-based models. Cedar Gate’s Capitation Adjudication is designed to handle all the nuances of any VBC contract in any line of business, including LEAD.

2: The alignment methodology in LEAD is dramatically different from ACO REACH.

Alignment methodology — the process CMS uses to align specific beneficiaries to an ACO or payment model — is changing significantly. Similar to MSSP, LEAD will align beneficiaries using the provider taxpayer identification number (TIN) model instead of the Taxpayer Identification Number — National Provider Number (TIN-NPI). Since TINs tend to cover more clinicians than a TIN-NPI, this change signals that CMS is trying to make it harder for ACOS to “cherry pick” the best providers via their NPI.

CMS is also making it easier to bring new TINs — and therefore new beneficiaries — into LEAD mid-year. In addition to prospective alignment, which aligns beneficiaries before the start of each performance year via beneficiary claims history (claims alignment), or beneficiary voluntarily aligning to the ACO (voluntary alignment), CMS is introducing a hybrid alignment methodology.

With hybrid alignment, ACOs can update their alignment during the performance year. Voluntary alignment will be updated monthly. Claims-based alignment will be set prospectively, but when an ACO adds new Participant TINs during the performance year, there will be an additional mid-year claims-based alignment update. ACOs can only add eligible beneficiaries mid-year, they cannot drop beneficiaries mid-year. This means more opportunities to add new TINs in a performance year, and the ability to provide better quality care for sooner than REACH permitted.

3: CARA adds critical flexibility for bundles that does not exist in other ACO programs. 

CMS-Administered Risk Arrangements (CARA) is a new voluntary bundled payment initiative for ACOs participating in the LEAD Global Risk Option to promote data sharing and collaboration among primary care “participating providers” and “preferred provider” specialists. Through CARA, ACO may contract with local preferred providers to create bundle arrangements, or what CMS refers to as “episode-based risk arrangements” (EBRAs). The ACO’s selected preferred provider(s) will take on financial risk for aligned beneficiaries that initiate an episode of care, giving them the ability to participate in the VBC framework and take accountability for total cost of care in that episode. The ACO’s “participating TIN providers” will not be able to enroll in CARA.

LEAD launches in 2027, but the CARA option will not be available until January 1, 2028 (with some episodes, such as chronic conditions, not available until 2029 or later). Episode data and benchmark reports will be available in the second quarter of 2027 to help ACOs begin the work of identifying “preferred providers” and setting up EBRAs.

Episode-based payment models are growing in popularity with CMS, so it’s not surprising to see them adding options like CARA to ACO arrangements. Bundled payments effectively incentivize collaborative care, cost reduction, and quality improvement for many common and costly procedures, so we will likely see even more bundled payment and EBRA options in the future.

However, these procedures require significant understanding and experience to build an appropriate episode of care, develop partnerships, and model and optimize performance. LEAD ACOs planning to participate in CARA should be looking for a technology partner like Cedar Gate, with extensive bundled payment experience and a technology platform purpose-built for advanced alternative payment models.

Final Thoughts

Like all CMMI models, LEAD is a temporary model that CMS could change at any time. It is currently outlined as a 10-year plan, but if a new administration were to take over in 2028 or beyond, that could change. Additionally, we may see tweaks to the program as CMS evaluates its efficacy or identifies opportunities for improvement.

The good news is that, even with changes continuously coming out of CMS and CMMI, Cedar Gate is built to support organizations at every stage of value-based care with:

• Payment technology designed specifically for alternative payment models, including capitation and bundled payments

• Analytics platform that provides in-depth insights on all the critical information organizations need for CMS programs — with regular updates as CMS announces new programs, new parameters, and new metrics

• Fully integrated Analytics, Care, and Payment applications that share a single source of truth, to seamlessly translate analytics insights into actionable steps for care teams, allowing providers to better manage patients in any VBC model

Want to learn more about how our technology can support your LEAD or other ACO and VBC efforts? Let’s talk.