Is Medicare’s Newest ACO Model Right for Your Organization?

Medicare’s ACO REACH model sunsets on Dec. 31, 2026, making way for the new Long-Term Enhanced ACO Design (LEAD) model. LEAD will run from Jan. 1, 2027, through Dec. 31, 2036. LEAD’s unprecedented performance period of 10 years, as well as other key model differentiators, signal CMS’s continued emphasis on the shift from fee-for-service to value-based reimbursement. Achieving long-term success in LEAD will require organizations to take a thoughtful assessment of the model’s financial, operational and clinical implications.

By way of background, an accountable care organization (ACO) is a network of health care providers organized to participate in a payor program that incentivizes participating providers to deliver high-quality care below a cost benchmark for an assigned population. If the ACO meets both quality and cost targets, it will receive a portion of the shared savings from the payor. ACOs have been a successful mechanism for engaging primary care providers in comprehensively managing population health and the total cost of their patients’ care.

In a Medicare ACO, the population is limited to just traditional Medicare beneficiaries. Medicare has tested and continues to operate several ACO models. Most popular is the Medicare Shared Savings Program (MSSP) which was codified in the Affordable Care Act and commenced in 2012. MSSP continues to grow in participation and aggregate shared savings. ACO REACH launched in 2023 as  a redesigned version of a prior CMS direct contracting model.

Whether your organization is experienced in value-based care or entering into a value-based care arrangement for the first time, a strong understanding of the model mechanics can help organizations position themselves to capture shared savings, manage downside risk and make strategic investments in care delivery. In advance of LEAD beginning, here are a few differences (and similarities) between the LEAD and REACH models so that your organization can plan for success.

Attribution

Attribution is the process by which Medicare beneficiaries are assigned to a particular ACO. Attribution methodologies are largely similar between REACH and LEAD.

1. Claims-based alignment: assigned to the primary care provider who delivered most of a beneficiary’s primary care services
2. Voluntary alignment: beneficiaries choose their ACO by selecting their primary care provider through CMS’s website or by signing an attestation

In either event, the beneficiaries are then aligned with the ACO in which their primary care provider is participating.

LEAD adds flexibility compared to REACH:

• LEAD permits an annual mid-year attribution update to add beneficiaries from provider groups that joined an ACO mid-year. In REACH, this only occurs at the beginning of each performance year
• LEAD modifies minimum beneficiary requirements for certain ACOs from 5,000 to 1,000 for new ACOs, and to 800 for ACOs with a high proportion of beneficiaries that meet High Needs eligibility

Benchmark

An ACO benchmark is the estimated cost of care (reimbursed under Medicare) that serves as the ACO’s financial target. Each year, the total health care spend of the ACO’s assigned beneficiaries must be below that benchmark in order for the ACO to be eligible for a portion of shared savings.

Medical spend benchmarking in LEAD will be based on the beneficiaries’ actual medical spend in Performance Years 2024, 2025 and 2026. Unlike in REACH, there will be no traditional rebasing, meaning benchmarks will not be adjusted throughout the 10-year period, meaning the baseline of  medical costs will hold steady. Instead, annual adjustments will only be based on regional and national medical spend trends.

This approach stands to benefit ACOs that have already successfully lowered medical costs. The 10-year period without rebasing allows these ACOs to continue benefiting from reductions they achieve rather than having those savings fully incorporated into a lower future benchmark.

The LEAD benchmarking approach will also allow higher cost ACOs to begin with benchmarks that only take historical medical spend into consideration. While most ACO benchmarks include regional spending, this would be phased in gradually for higher cost ACOs to support realistic, gradual improvement.

Payment Mechanism

Like REACH, LEAD is a capitation-based model. CMS makes monthly payments to each ACO, and the ACO is responsible for administering the payments to its participating providers. LEAD continues to offer Primary Care Capitation and Total Care Capitation, depending on the organization’s risk tolerance and market strategy.

LEAD expands on REACH’s capitation approach by:

• Introducing the ability to establish sub-capitation arrangements with specialists
• Offering an add-on payment for high-cost ACOs to support upfront investments in value-based care (this is expected to be particularly helpful for ACOs serving rural communities)

Quality Metrics

LEAD blends the quality measures from REACH and MSSP. It will continue to measure the five REACH measures:

1. All-condition readmissions
2. Unplanned readmissions
3. Days at home for patients with chronic conditions
4. Timely follow-up appointments
5. Patient experience

LEAD will also measure two electronic clinical quality measures drawn from MSSP: diabetes care (glycemic status) and controlling high blood pressure.

Enrollment

LEAD includes many additional policy and operational details. But these four structural components — attribution, benchmarking, payment mechanics and quality metrics — are helpful starting points for organizations evaluating the model.

ACOs interested in joining LEAD were required to apply by May 17, 2026. ACOs accepted into the model (which CMS is expected to announce this summer) may enroll new provider groups throughout the 10-year performance period.