ACO REACH is a voluntary Medicare model run by the Centers for Medicare & Medicaid Services (CMS) that pays groups of healthcare providers to take financial responsibility for the total cost and quality of care for a defined population of Medicare beneficiaries. Instead of simply billing Medicare for each service, participating organizations (called ACOs) agree to meet spending benchmarks. If they keep costs below the benchmark while maintaining quality, they share in the savings. If costs exceed the benchmark, they owe money back.
The model evolved from the earlier Global and Professional Direct Contracting (GPDC) model, adding stronger health equity requirements and governance standards. It currently runs through 2026.
Two Risk Tracks: Professional and Global
ACO REACH offers two levels of financial risk, and every participating ACO chooses one.
- Professional (partial risk): The ACO shares 50% of any savings or losses relative to its benchmark. This is the lower-stakes option, designed for organizations newer to risk-based contracts or less capitalized.
- Global (full risk): The ACO takes on 100% of savings or losses. In exchange for this higher exposure, Global ACOs have access to more flexible payment options. However, CMS applies a discount of 3% to 3.5% to the benchmark before calculating savings, which effectively guarantees that CMS itself captures some of the value. Professional ACOs have no discount applied.
Both tracks have a 2% quality withhold, meaning CMS holds back 2% of the ACO’s benchmark expenditure and only returns it (partially or fully) based on the ACO’s performance on quality measures. An ACO that delivers poor-quality care can lose that 2% on top of any shared losses.
How the Payment Mechanisms Work
Traditional Medicare pays providers on a fee-for-service (FFS) basis: each office visit, test, or procedure generates a separate claim. ACO REACH layers a different payment structure on top of this, giving ACOs a predictable monthly payment while reducing or eliminating the underlying FFS claims. There are two payment options.
Primary Care Capitation
Under Primary Care Capitation (PCC), the ACO receives a risk-adjusted monthly payment covering primary care services delivered to its aligned beneficiaries. Providers continue to bill and receive FFS payments for non-primary care services like specialty visits, surgeries, and hospital stays. Only primary care specialists within the ACO have their FFS claims reduced.
Every ACO on the Professional track must use this payment mechanism. Starting in performance year 2025, all participating providers in a PCC arrangement must have 100% of their eligible primary care FFS claims reduced, meaning their compensation for those services comes entirely through the capitated payment from the ACO rather than from traditional Medicare billing. This was phased in gradually: the floor was 10% in 2023, 20% in 2024, and reached 100% in 2025.
Total Care Capitation
Total Care Capitation (TCC) is only available to Global ACOs and covers a much broader scope. The monthly capitated payment applies to all services covered under Medicare Parts A and B (hospital, outpatient, physician, and other medical services) delivered by the ACO’s providers. This means the ACO takes on financial responsibility not just for primary care, but for specialty care, imaging, procedures, and inpatient services rendered by its network.
Under TCC, all core participating providers must have 100% of their relevant FFS claims reduced. Preferred providers (those who work with the ACO but aren’t core participants) can individually decide whether to participate and choose their own reduction percentage, anywhere from 1% to 100%. Some services remain outside the capitated payment regardless, including certain substance use and alcohol treatment claims.
How Beneficiaries Are Aligned
Medicare beneficiaries don’t “sign up” for ACO REACH the way you’d enroll in a Medicare Advantage plan. Instead, beneficiaries are aligned to an ACO based on their pattern of primary care utilization. If you see a doctor who participates in an ACO REACH organization, and that doctor provides the majority of your primary care, you may be aligned to that ACO.
Alignment is voluntary in the sense that beneficiaries retain full freedom to see any Medicare-accepting provider. There are no network restrictions, no referral requirements, and no changes to your Medicare benefits. The model operates behind the scenes from the beneficiary’s perspective. The ACO simply becomes financially accountable for the total cost of your care, which creates an incentive for the organization to coordinate that care more effectively, reduce unnecessary tests or hospitalizations, and invest in preventive services.
How Financial Benchmarks Determine Savings or Losses
Each ACO receives a spending benchmark based on the expected cost of caring for its aligned beneficiaries. This benchmark is risk-adjusted, meaning it accounts for how sick or complex the patient population is. Sicker populations get higher benchmarks.
At the end of each performance year, CMS compares the ACO’s actual spending against this benchmark. For a Global ACO, CMS first applies the discount (3% in 2023 and 2024, 3.5% in 2025 and 2026), which lowers the benchmark and makes it harder to show savings. Then CMS subtracts the 2% quality withhold. Whatever savings remain, the Global ACO keeps 100%. If actual spending exceeds the adjusted benchmark, the Global ACO owes 100% of the losses.
Professional ACOs face a simpler calculation: no discount is applied, but they only share 50% of whatever savings or losses result. This makes the upside smaller but also limits the downside.
What Makes ACO REACH Different From Other ACO Models
Several features distinguish ACO REACH from the more widely known Medicare Shared Savings Program (MSSP), which is the largest ACO program in the country.
The most significant difference is the depth of financial risk. MSSP ACOs can choose tracks where they share only in savings and face no downside risk at all, at least in their early years. ACO REACH has no upside-only option. Every participant faces both savings and losses from day one, which creates stronger incentives to manage costs but also requires more financial sophistication and capital reserves.
The capitated payment mechanisms are another distinction. By giving ACOs a fixed monthly payment per patient rather than relying entirely on FFS billing, ACO REACH moves closer to the way Medicare Advantage plans operate. This gives providers more flexibility to invest in care management, home visits, telehealth, and other services that traditional FFS doesn’t always reimburse well.
CMS also built health equity requirements into the model. Participating ACOs must develop and implement a health equity plan, collect demographic data on their patient populations, and work to reduce disparities in care delivery and outcomes. The benchmarking methodology incorporates social risk factors, adjusting financial targets to reflect the challenges of serving higher-need communities.
Who Participates in ACO REACH
ACO REACH participants include health systems, physician groups, and organizations backed by private equity or other investors. This mix has been a source of debate. Critics argue that investor-backed entities may prioritize profits over patient care, while supporters say the model needs diverse participants to scale value-based care beyond the traditional health system model.
CMS responded to some of these concerns when it transitioned from the GPDC model to ACO REACH, adding governance requirements that give participating providers more control over ACO decision-making and requiring beneficiary representation on governing boards. The intent is to ensure that the clinicians actually delivering care have meaningful influence over how the organization operates, regardless of who owns or funds it.