Posted: 24 Mar. 2022 6 min. read

New Medicare ACO payment model targets health equity

By, the Deloitte Center for Health Solutions

Health care providers have until April 22 to complete the application to participate in the Realizing Equity, Access, and Community Health (REACH) payment model for Medicare.1 Last fall, the Centers for Medicare and Medicaid Services’ Innovation Center (CMMI) launched a 10-year strategic refresh with the goal of achieving equitable outcomes through high-quality, affordable, person-centered care. One of the primary objectives is to embed health equity in payment models and focus more attention on underserved populations. The new Accountable Care Organization (ACO) model will go into effect on January 1, 2023.

The REACH model is one of the first new payment models to be introduced by the Biden administration, which has made health equity a specific goal. The administration also wants to move fee-for-service (FFS) Medicare beneficiaries into coordinated care arrangements, which will primarily be led by providers. According to CMS, Medicare FFS beneficiaries who receive care through a REACH ACO will have access to enhanced care-coordination services, telehealth visits, post-discharge home health care services, and may receive assistance with copayments. Providers must demonstrate that they are reaching underserved populations, meeting health equity measures, and collecting data to demonstrate both efficiency and quality improvements.

To help health care stakeholders understand the new model, and determine whether they should participate, we reached out to Anne Phelps, Deloitte’s regulatory leader for health care, and Dr. Jay Bhatt, executive director of both the Center for Health Solutions (CHS) and the Deloitte Health Equity Institute. Jay also provides medical care to underserved communities in Chicago.

CHS: What was the impetus for this new payment model and what did it replace?

Anne: When CMMI announced its 10-year plan, one of its goals was to transition traditional FFS Medicare beneficiaries into coordinated-care arrangements by 2030 to provide enhanced benefits and improve their care. The ACO REACH model replaces other types of direct contracting between health plans and providers and requires them to be led by providers. For example, the arrangement model must be governed by a board that is 75% provider members. Health plans can participate in this model, but their role will be somewhat more limited. The goal is to help providers transition from fee-for-service payment models to value-based payment models, which require care coordination, increased efficiency, and payments based on quality measures.

Jay: CMS appears to be trying to encourage more provider organizations to consider an ACO model. I used to work with an organization that is working to improve health care delivery and access for Medicaid beneficiaries. The unique care-delegation model—supported with technology and care coordination—helped community health centers participate in an ACO program that targeted a significant at-risk population. That model was focused on combining technology with data to ensure than patients had access to the right care, at the right time, at the right place. Some safety-net organizations might find it difficult to participate in an ACO. But this model could help broader health systems and health care organizations deliver high-quality, equitable care to underserved communities. 

CHS: How might the REACH model make health care and access more equitable?

Jay: Risk adjustment is often a hotly debated topic in Medicare. Many hospitals and health systems will be interested in this model, but it could also be important for community health centers that serve Medicare beneficiaries. However, I don’t expect many of them will run toward this model. A lot of these organizations have designed their business around a direct-contracting entity. Moving to the REACH model would likely require them to pivot. It could be challenging for them to develop the components required for participation in the plan. For example, they would need to collect beneficiary-reported demographics information and other data about the beneficiaries they serve. Each ACO has to develop and submit a plan that outlines their strategy.

CHS: Why should hospitals, health systems, and other health care providers be paying attention to this new payment model?

Jay: There are clear benefits to reducing barriers in underserved communities where there might be fewer clinicians to serve that population. CMS updated its 2022 payments for Medicare by incorporating health-equity quality measures across all of the different reimbursement streams. I see that as an important step away from FFS and toward alternative payment models.

Anne: The move toward value-based, coordinated-care models that focus on all Medicare beneficiaries and link reimbursement to improved quality will likely continue. This model counts as an Advanced Alternative Payment Model, which means participating providers could see higher payments and bonuses. I also believe there is a strong incentive for first-mover advantage in the traditional Medicare program. This model also encourages providers to move forward in a tangible way to achieve their health-equity goals, which is a strong incentive.

CHS: How big of a lift will this be for providers that want to participate? How should they prepare?

Anne: We have been talking with providers that are currently participating in the Direct-Contracting program. Those organizations should decide if they want to move from direct contracting to this new payment model. Organizations that have not yet moved to an ACO will likely need to determine whether they can be ready by January 1. It’s a one-time application process, and it could be a foot in the door to participating in future payment models. CMS is allowing an implementation period, which means they will offer assistance to help providers transition to the new model.

Jay: This is an opportunity for providers to gain experience with payment models that encourage clinicians to provide services that keep beneficiaries healthy. Some providers might not feel like they are ready to make this move, but I think we will be seeing more payment models in the future. The focus on health equity is likely only going to increase. Participating in this model could drive further innovation in the future.


1 ACO REACH,, March 7, 2022

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