Health system-led standard ACOs increased Medicare spending by 0.8% over ACO REACH’s first three years, while ACOs built around independent physician practices cut spending by the same 0.8%, a combined swing of about $285 million between the two groups, according to CMS’s third annual evaluation of the model.
The divergence was driven largely by hospital ACOs’ higher use of inpatient rehab and long-term care hospital days, along with more emergency room visits.
Overall, the REACH model increased net Medicare spending by 0.8% in 2023, even as participating accountable care organizations cut gross costs and improved care quality on nearly every measure tracked.
Combined, net spending across the program’s three ACO types rose by about $192 million for the year, as $869 million in shared savings and bonus payments to ACOs outweighed roughly $236 million in gross savings compared with non-participating providers.
The REACH model pays ACOs to manage the cost and quality of care for a group of traditional Medicare enrollees. The program launched in 2021 as the Global and Professional Direct Contracting Model, then CMS redesigned and renamed it ACO REACH in 2023. ACOs choose how much financial risk to take on and get paid up front each month, then either keep a share of any savings or repay Medicare for losses, based on how their patients’ costs and quality scores compare with a similar group of patients outside the model.
The model will wind down at the end of 2026, and CMS plans to replace it with a new model called LEAD in 2027 that will run for 10 years with revised benchmarking meant to attract a wider mix of providers.
Eight more things to know about the third evaluation:
- The net spending increase wasn’t the same across the three ACO types in 2023. High needs ACOs, which serve the most medically complex and costly patients, saw net spending jump 14.5% ($85.2 million), the sharpest one-year increase of any group. Standard ACOs’ net spending rose a smaller 0.5% ($106.5 million), while the increase for new entrant ACOs was flat.
- Gross spending, which strips out CMS’s payments to ACOs, fell for every ACO type in 2023. Standard ACOs, which made up 80% of participants, cut gross spending 0.9% ($109 per patient) for the year. New entrant ACOs cut gross spending 6.2% ($890 per patient), the biggest drop of any group. High needs ACOs saw a small decline.
- Standard ACOs showed no net change in gross spending over three years, since a cut in 2023 was canceled out by an increase in 2022. New entrant and high needs ACOs both showed significant reductions, down 3.2% and 2.3%, respectively.
- Standard ACOs cut potentially avoidable hospital stays by 4.7% and unplanned hospital admissions among patients with multiple chronic conditions by 2%, while increasing recommended diabetes care and timely follow-up visits after a health flare. New entrant ACOs posted the biggest single quality win in the report, with an 11.7% drop in avoidable hospitalizations.
- Health system-led ACOs saw a 3.6% rise in inpatient rehab and long-term care hospital days and a 0.5% uptick in ED visits over the three-year period. Independent practice ACOs moved the opposite direction on nearly every measure, with hospitalizations down 1.3%, hospital stays 1.5% shorter, ED visits down 1%, and home health use down 2.5%.
- ACOs that accepted full responsibility for their patients’ total cost of care cut gross spending 0.5% over the evaluation period, while ACOs that chose the lowest-risk option increased spending 0.6%.
- Beneficiaries with eight or more chronic conditions, those with disabilities or kidney failure, and those enrolled in both Medicare and Medicaid all saw bigger spending cuts than average in 2023. In contrast, spending on the healthiest patients in the program went up.
- The model kept growing despite its mixed financial results. 132 ACOs took part in 2023, up from 99 the year before, covering more than 2 million Medicare patients across all 50 states. Participation from safety net providers more than doubled year-over-year, growing from 420 to 871 sites.
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