The Program

The ACO REACH (short for “Accountable Care Organization Realizing Equity, Access, and Community Health”) Model is the new Medicare value-based payment demonstration model for providers launched this year by the Biden administration through the Center for Medicare and Medicaid Innovation. The model seeks to improve the quality of care and health outcomes for Medicare beneficiaries through the alignment of financial incentives, a program emphasis on patient choice and care delivery, and strong monitoring by the Centers for Medicare & Medicaid Services (CMS). The ACO REACH Model builds upon and replaces the global and professional direct contracting model and differs from the Medicare Shared Savings Program (MSSP) model. Applicant ACOs awarded the opportunity to participate in the ACO REACH Model were announced on June 30, 2022.

ACOs in the ACO REACH Model can elect either the “professional” or “global” risk-sharing option to govern the financial arrangement with CMS. The key differences between the two options are the amount of shared savings and losses that the ACO is eligible and responsible for (50 percent versus 100 percent), the type of monthly capitation payment such ACO will receive from CMS, and the discount and quality withholds that CMS will apply to the benchmark (target) amounts.

With respect to the monthly capitation payments to be made to ACOs, CMS will pay professional ACOs (those that elect only to assume shared savings/losses for professional expenses) a primary care capitation (PCC) amount, but global ACOs may elect either PCC or total cost of care capitation payments. According to the ACO REACH Model Finance-Focused Frequently Asked Questions (“ACO REACH FAQs”), the purpose of the requirement that a monthly capitation payment be made to the ACO is to “provide ACOs with an opportunity to administer the flow of funds while they manage total cost of care. By giving ACOs the funds to pay for services, ACOs will have greater leverage and increased flexibilities to enter into downstream payment arrangements that can incent providers and suppliers to work together and coordinate care for a defined set of aligned beneficiaries, with the potential to generate better outcomes and lower costs.” (See the ACO REACH FAQs at question 3.) The funding for such capitation payments comes from the fee reductions agreed to by providers in the ACO.

Types of Providers

ACOs must contract with the providers in their network, which must include “Participant Providers” and may include “Preferred Providers” in their network. Participant Providers are used to identify the Medicare beneficiaries who are aligned to the ACO on the basis of historical primary care service utilization, but Preferred Providers are not. The request for applications for the ACO REACH Model defines the two types of providers in the program as follows (emphasis added):

Participant Provider: An individual or entity that: (1) is a Medicare-enrolled provider or supplier (as such terms are defined in 42 C.F.R. § 400.202); (2) is identified on the ACO’s list of Participant Providers by name, individual National Provider Identifier (NPI), organizational NPI, TIN, Legacy TIN or CCN (if applicable), and CMS Certification Number (CCN) (if applicable); (3) bills for items and services it furnishes to Medicare FFS beneficiaries under a Medicare billing number assigned to a TIN in accordance with applicable Medicare regulations; (4) is not a Preferred Provider nor a Prohibited Participant; and (5) has agreed, pursuant to a written agreement with the ACO, to participate in the model and to comply with care improvement objectives and model quality performance standards. The Capitation Payment Mechanism chosen by the ACO will apply to all Participant Providers that have an agreement with that ACO . . . .

Preferred Provider: A Medicare provider or supplier that: (1) is a Medicare-enrolled provider (as defined at 42 C.F.R. § 400.202) or supplier (as defined in 42 C.F.R. § 400.202); (2) is identified on the ACO’s list of Preferred Providers by name, NPI, individual TIN, organizational TIN, Legacy TIN or CCN (if applicable), and CMS Certification Number (CCN) (if applicable); (3) bills for items and services it furnishes to Medicare FFS beneficiaries under a Medicare billing number assigned to a TIN in accordance with applicable Medicare regulations; (4) is not a Participant Provider nor a Prohibited Participant; and (5) has agreed to participate in the model pursuant to a written agreement with the ACO.

ACO-Provider Agreement Requirements

Signed Agreements Required Before January 1, 2023

ACOs are responsible for paying both Participant Providers and those Preferred Providers that have agreed to a fee reduction from the capitation payments the ACO receives. The amounts the ACO must pay are negotiated by the ACO and the providers. Providers must agree to have their Medicare fee-for-service payments from CMS reduced by negotiated percentage amounts. Such reimbursement arrangements with the ACO and fee reductions with CMS must be memorialized in agreements (“ACO-Provider Agreements”) signed before the beginning of each performance year. The first performance year is 2023. The ACO-Provider Agreements must also comply with the terms of the ACO’s participation agreement with CMS and applicable model requirements.

Bilateral Agreements Only

CMS has taken the view that an ACO-Provider Agreement must be a bilateral agreement between the ACO entity and the Provider entity and that no other entities may be a party to that agreement. This means that network entities such as independent practice associations or clinically integrated networks and management services organizations may not be a party to the ACO-Provider Agreement. For providers that have used a network entity for MSSP or other ACO projects, this will require a shift in operations to ensure compliance with the ACO REACH requirements.


CMS notes that “[the] fee reduction agreement will serve as an attestation between the REACH ACO and the entity under whose tax identification number (TIN) the Participant Provider or Preferred Provider bills Medicare, that all providers and suppliers participating in the ACO’s structure capitated payment mechanism that bill under that TIN have agreed to participate in the capitation payment mechanism and to the applicable fee reduction.” (See the ACO REACH FAQs at question 28.)


The participation agreement (including the fee reduction agreement) does not need to be submitted to CMS, but it is subject to audit by CMS and must be provided to CMS upon request. CMS has published compliance guidance that states the following (in its “ACO-Provider Agreement Audit” section under “Auditing”):

Description: Verify annually that participants have executed written financial arrangements and fee reduction agreements with downstream participants that satisfy the applicable requirements of the model participation agreement, and that the participant has sent the requisite notifications to its downstream participants and to the executive of each TIN through which a downstream participant bills Medicare.

Purpose: Ensure that downstream participants have agreed to participate with the participant and are aware of and have agreed to comply with applicable model requirements, including requirements specific to the access and use of BEs/BEIs [beneficiary enhancements and beneficiary engagement incentives] to support care delivery, and have agreed to the applicable Medicare FFS fee reduction.

Next Steps   

ACOs that had their ACO REACH applications approved must draft agreements with the Participant Providers and Preferred Providers in their network that comply with the various requirements described above. An ACO and its providers need to negotiate and sign their ACO-Provider Agreement before January 1, 2023 (the beginning of the first performance year).

Attorneys in Epstein Becker Green’s Health Care & Life Sciences practice have extensive experience in this area and are available to help ACOs draft compliant ACO-Provider Agreements.

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This Insight was authored by Jackie Selby and Kevin J. MaloneFor additional information about the issues discussed in this Insight, please contact one of the authors or the Epstein Becker Green attorney who regularly handles your legal matters.

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