On February 24, 2022, the Department of Health and Human Services (HHS), Centers for Medicare & Medicaid Services (CMS), announced the Accountable Care Organization Realizing Equity, Access, and Community Health (ACO REACH) Model, which will begin January 1, 2023, and replace the Global and Professional Direct Contracting (GPDC) Model.  The Request for Applications (RFA) has been posted on CMS’s website, and applications are due by April 22, 2022.  While the application is not binding, the failure to apply will foreclose any opportunity to participate.

This article discusses the termination of the GPDC Model, the establishment of the ACO REACH Model, and the differences between them.

The GPDC Model

The GPDC Model was a set of two voluntary risk-sharing options.  The first option (the Professional option) offered a lower risk-sharing arrangement (50% savings/losses) and provided a capitated, risk-adjusted monthly payment for primary care services (Primary Care Capitation).  By contrast, the second option (the Global option) offered the highest risk-sharing arrangement (100% savings/losses) with two payment options:  Primary Care Capitation (similar to the Professional option) or Total Care Capitation with a risk-adjusted monthly payment.  Under both options, the Direct Contracting Entity’s (DCE) Participating Providers must have held at least 25% of the governing board voting rights.

A principal, and appealable, aspect of the GPDC Model was that it allowed different types of health care organizations to participate in value-based care arrangements in traditional Medicare fee-for-service (FFS) as DCEs.  And, participating DCEs were provided with the added benefit and flexibility of developing and offering certain financial and other incentives protected by a fraud and abuse waiver under section 1115A(d)(1) of the Social Security Act.  What the waiver did not protect, and what the GPDC Model did not allow, however, were certain marketing activities by DCEs aimed at recruiting Medicare beneficiaries to participate.  Beneficiaries were aligned with DCEs in one of two ways:  claims-based alignment where beneficiaries were aligned based on the plurality of primary care services by DC Participant Providers, as evidenced in claims utilization data, or voluntary alignment where beneficiaries communicated their desire to be aligned with a DC Participant Provider.  Beneficiary choice was, and still remains, key.  Along a similar vein, if a traditional Medicare FFS beneficiary chose to formally enroll in a Medicare Advantage plan, then that beneficiary became ineligible for alignment with the DCE.  At that point, the applicable regulations prohibited DCEs from targeting newly-enrolled beneficiaries by engaging in certain communications or marketing activities, and further prevented DCEs from restricting beneficiaries’ access to primary care providers—to safeguard continuity of care.

However, the GPDC Model drew significant criticism, especially by Democratic Members of Congress.  Even with the DCE marketing requirements in place, beneficiaries have been caught in the middle between their primary care provider and DCE or Medicare Advantage plan, especially when there have been changes in and terminations of the network of providers.  In a letter to the Secretary of HHS and the Administrator of CMS, such Members urged the permanent ending of the GPDC Model.  The Members noted that DCEs are driven by “perverse motive[s]” to generate and maximize profits (e.g., because of their private equity owners) at the expense of a protected and sanctified facet of the nation’s health care system—beneficiary choice.

That was early January of this year.  Fast forward to mid-February:  More than 200 health care organizations wrote the Secretary of HHS, urging the opposite.  Rather than ending the GPDC Model altogether, key stakeholders requested the model’s refinement.  Suggestions to refine and improve included limiting participation to provider-led DCEs (rather than private equity-owned), creating additional safeguards to protect beneficiaries, and rebranding and changing the GPDC Model’s name to “help communicate how [the] model is part of the evolution of accountable care.”

The “New” ACO REACH Model

It didn’t take long for HHS and CMS to respond—with an overhaul of the GPDC Model, both in name and in substance.  Considering stakeholder feedback, beneficiary experience, and the new administration’s priorities, CMS announced that it had significantly modified and renamed the GPDC Model as the ACO REACH Model.  Consistent with its vision for the next decade, CMS has promised that the new and improved ACO REACH Model will (1) ensure that beneficiaries retain freedom of choice for providers and suppliers, (2) promote greater equity in the delivery of high-quality services, and (3) improve access to services and quality outcomes in underserved communities.  To achieve these goals, CMS has specifically promised to strengthen the monitoring and compliance of DCEs that will continue participating in the ACO REACH Model by, in part:

  • Monitoring for noncompliance with prohibitions against anti-competitive behavior and misuse of beneficiary data,
  • Assessing annually whether beneficiaries are being shifted into or out of Medicare Advantage, and
  • Reviewing marketing materials regularly to ensure information on the ACO REACH Model is accurate and beneficiaries understand their rights and freedom of choice.

Additionally, CMS now requires at least 75% control of each ACO’s governing body to be held by Participating Providers (as compared with 25% under the GPDC Model), which increases and ensures the roles that primary care and other providers play in the accountable care provided to beneficiaries.

In tandem with these protections, CMS will not allow current DCEs in the GPDC Model to continue participating in the ACO REACH Model unless they can demonstrate a “strong compliance record.”  Performance in the ACO REACH Model will span five years through 2026.  And, CMS’s end goal is for all Medicare beneficiaries with Parts A and B coverage to be in a care relationship with accountability for quality and total cost of care by 2030.

Perhaps time will tell whether the ACO REACH Model will achieve HHS’s goals for providing whole-person, high-quality, low-cost care to traditional Medicare FFS beneficiaries.  Like all of CMS’s models, the ACO REACH Model is another “test” to improve quality and health care efficiencies, align incentives to better coordinate care, and protect patient choice.

It is important to note that, similar to the GPDC Model, the ACO REACH Model requires that the ACO adhere to applicable State licensure requirements for the assumption of medical risk—including with respect to, e.g., third-party administrators, risk-bearing entities, the corporate practice of medicine, fraud and abuse, and the business of insurance.  As such, an ACO may be required to meet other applicable State licensure requirements depending on the particular laws in a State and the discretion of a State’s regulatory agencies.

We have expertise in this space and can assist clients with navigating the nuanced State and Federal statutory and regulatory requirements related to licensure, reserve requirements, and marketing activities, including for the newly-redesigned ACO REACH Model.  The ACO REACH Model RFA can be found here.

Photo of Whitney Phelps Whitney Phelps

Whitney Phelps provides practical and strategic counsel, solutions and analysis for healthcare stakeholders of all kinds. She has particular expertise in managed care and value-based contracting, including with various alternative payment arrangements between providers and payers. Her experience includes advising on a broad…

Whitney Phelps provides practical and strategic counsel, solutions and analysis for healthcare stakeholders of all kinds. She has particular expertise in managed care and value-based contracting, including with various alternative payment arrangements between providers and payers. Her experience includes advising on a broad range of complex healthcare transactions and regulatory matters relating to long-term care, home care, behavioral health, risk contracting and ambulatory services.

Whitney has deep capabilities negotiating complex joint ventures and other transactions, with special attention to New York regulatory compliance. Whitney also has extensive experience representing health care entities before the New York State Executive Branch, including with respect to shaping health care policy and Medicaid redesign, as well as laws and regulations impacting regulated healthcare entities in New York.

Whitney also served as Director of Managed Care and Associate Counsel at the Healthcare Association of New York State.

Photo of Matthew J. Westbrook Matthew J. Westbrook

Matt is an associate in the Corporate Department and a member of the Health Care Group.  His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others.  Matt specifically…

Matt is an associate in the Corporate Department and a member of the Health Care Group.  His practice focuses on providing regulatory compliance advice for the Firm’s health care clients, including service providers, health plans, operators, investors, and lenders, among others.  Matt specifically provides advice on fraud and abuse matters arising under the Federal False Claims Act (FCA), Civil Monetary Penalties Law (CMPL), Federal Anti-Kickback Statute (AKS), and Physician Self-Referral Law (Stark Law), as well as on the regulations promulgated by the Drug Enforcement Administration (DEA) and the Department of Health and Human Services, including the Office of Inspector General (OIG), Centers for Medicare & Medicaid Services (CMS), and Food and Drug Administration (FDA).