ACO REACH And Advancing Equity Through Value-Based Payment, Part 2

Value-based payment (VBP) models can be a useful tool for reducing health inequities and advancing equity goals. However, some evidence suggests that the uptake of VBP models has lagged in marginalized populations, and that in some circumstances VBP could exacerbate disparities. Consequently, many VBP models are now adopting a more intentional focus on equity.

In this context, the Center for Medicare and Medicaid Innovation (the Innovation Center) recently announced that its Global and Professional Direct Contracting pilot will be redesigned into a new model called Accountable Care Organization (ACO) Realizing Equity, Access, and Community Health (REACH). Reflecting the Innovation Center’s strategic focus on health equity as a top priority—and on achieving the broader equity goals of the Department of Health and Human Services and the Centers for Medicare and Medicaid Services (CMS)—ACO REACH incorporates many new health equity-focused elements affecting upfront payments, data collection, provider selection, community governance, and delivery and benefit design. These health equity-focused VBP design elements are on top of ACO REACH’s main advanced alternative payment structure of monthly population-based payments for either primary care services or for all covered services with strong links to quality of care.

ACO REACH is a substantial pilot program. It is aimed at improving equity but also at assessing which payment reform design elements can best do so while also achieving the “Triple Aim”—better care experience, better population outcomes, and lower health care costs. ACO REACH and the other equity-focused VBP models consequently provide an unprecedented opportunity for augmenting the meager evidence we have on how to improve equity. 

To inform health policy makers and stakeholders on approaches to achieve equity through VBP, we scanned the literature and reviewed various policy initiatives. We spoke with experts implementing equity-focused VBP models or with expertise on these models. In part 1 of this article, we presented a framework for categorizing the spectrum of approaches we identified for improving equity through VBP model design. We also began discussing the key design elements for explicitly addressing equity in ACO REACH, highlighting examples of how some states and commercial payers have approached those same design elements and identifying additional opportunities for the Innovation Center and other parts of CMS, states, and commercial payers to continue to test ways to embed equity in VBP models. In this second and concluding part of the article, we continue that discussion.

VBP Design Element: Timely Collection And Sharing Of Demographic And Social Needs Data

A necessary precondition to tracking and evaluating accountability on equity within VBP models is accurate data on population groups and social needs. CMS requires ACO REACH model participants to collect two types of data. First, model participants must report beneficiary-supplied demographic data, which includes race, ethnicity, gender identity, and sexual orientation. Second, although optional for the first year, CMS encourages model participants to report social determinants of health (SDOH) data using a validated assessment tool. Although availability of demographic data and SDOH data is a first step toward monitoring progress toward health equity, it is critical to ensure such data are accurate across model participants, as there is inconsistency in tracking sociodemographic in models to date.

States, health plans, and other health care organizations are also developing strategies to fill data gaps needed to improve equity, including efforts to collect race and ethnicity data to identify disparities and develop interventions to address these disparities. Blue Cross Blue Shield of Massachusetts (BCBS MA) is also exploring the use of data imputation to fill in missing self-reported data while they work to improve self-reporting rates as part of an equity-focused VBP effort. And the Oregon Health Authority (OHA) is piloting the collection of beneficiary-reported sociodemographic data at the point of care using QR codes.

Other states are focusing on SDOH data collection to understand inequities. North Carolina’s Medicaid’s Healthy Opportunities Pilots program developed a standardized set of SDOH screening questions for its $550 million program to address social needs through managed Medicaid, launching this month. To assist health care organizations in addressing SDOH needs, the National Quality Forum recommended a new measure for social needs screening known as the “Screen Positive Rate for Social Drivers of Health,” which is currently being reviewed by CMS. However, like many of the strategies reviewed in this paper, these efforts are new, and we don’t yet know what works (or doesn’t work).

VBP Design Element: Expanding Covered Services For Equity

The ACO REACH model includes a new benefit enhancement that increases the range of services that may be ordered by nurse practitioners—an innovation that can increase flexibilities and access to hospice care, diabetic care, cardiac rehabilitation, home infusion therapy, and nutrition therapy.

Prior to the ACO REACH model, federal, state, and commercial payers initiated efforts to improve health equity through innovations in benefit design within financial risk models. For example, in recent years CMS further expanded the types of supplemental benefits Medicare Advantage plans can optionally offer within their contracted capitation rates, with some benefits covering nonmedical social support services for chronically ill populations. Evidence shows that adding supplemental benefits can augment the effectiveness of treatment programs; for example, providing supplemental benefits for meal or nutritional services can improve the effectiveness of obesity treatment. More advanced examples include North Carolina’s use of the 1115 waiver mechanism to design its Healthy Opportunities Pilots program with a fee schedule designed to address SDOH needs through Medicaid managed care (beneficiaries receive a standard SDOH screener and unmet social needs must be addressed); and Oregon’s authorization that coordinated care organizations (CCOs) can use their prospective global budgets to cover “health-related services.”

VBP Design Element: Accountability For Equity Improvement Not Tied To Payment

A key approach within ACO REACH is soliciting applicants to develop a health equity plan with steps to identify health disparities and specific actions to reduce them. Given the limited evidence regarding the effect of care redesign strategies on specific health equity outcomes, requiring participants to develop a health equity plan and report their results can further refine evidence on which particular care redesign strategies effectively improve specific health equity outcomes.

There are other examples of public payers using health equity plans in similar ways, all of which generally work to identify disparity targets, propose work with community partners, and assess impact. In the US, we see similar health equity plan requirements in Louisiana, Massachusetts, and Oregon. Louisiana Department of Health’s Office of Community Partnerships and Health Equity will oversee health equity plans, including in Medicaid. Grantees of the Massachusetts MassUP Investment Program are required to identify a particular SDOH that is leading to poor health and health inequities in a geographic community and work in cross-sector partnerships to design and execute a plan for addressing those needs through upstream activities to change social, environmental, and economic conditions. As such, MassUP allows great flexibility in plan design. Oregon’s CCOs have a health equity plan evaluation tool.

In the United Kingdom, “health equity audit” cycles are a process used to examine how SDOH, access to health services, and inequities are distributed across the population—and to develop a community-assisted plan.

However, health equity plans are new, and there are open questions on how they should be defined, measured, and enforced. A systematic review of the UK’s health equity audit approach shows success with some disparity reductions in certain outcomes but notes that evidence still remains sparse. On that note, experts we interviewed advised against being overly prescriptive about precisely how equity is tied to payment, given the wide diversity in approaches and the limited evidence on which equity-focused interventions work best. But at the same time, others point out the need to move toward specific, outcome-based goals. Experts we interviewed emphasized that specific outcomes may be more attractive targets for model participants if they are more likely to be changeable within a shorter time frame and can be addressed in outpatient settings by a patient’s primary care physician (as opposed to an outcome such as mammography, which typically occurs outside of the primary care providers’ walls). Another point we heard was that disparity reduction must be carefully designed such that a relative improvement in one population is not due to worsened outcomes in other populations.

VBP Design Element: Advanced Payment Model Financial Incentives And Support For Equity

There are multiple ways to structure financial incentives for improving equity. While ACO REACH includes many important VBP design elements that take steps toward accountability for equity—such as a plan to improve health equity, the health equity benchmark, and requirements to collect race and ethnicity data—they are not linked to financial incentives for cost and quality performance. The following subheads outline multiple options for tying equity to both cost and quality performance ranging across the Health Care Payment Learning and Action Network (HCP-LAN) categories from less to more advanced, highlighting examples that are being used in the field:

HCP-LAN Category 2B

Early efforts can focus on paying bonuses for stratified reporting, such as reporting quality measures by demographic factors such as race and ethnicity.

HCP-LAN Category 2C

Some VBP programs have gone one step further by paying bonuses for stratified progress. One commercial payer, BCBS MA, is developing such a “pay for equity” approach. Instead of competition between providers on relative equity, they are taking a “within provider” approach: when one provider reduces disparities in their own quality measures, they get a bonus and every qualifying provider in the market gets a smaller version of that bonus. This way, there is no disincentive for providers to share ideas with one another. In addition, CMS is also considering using it’s Office of Minority Health’s Health Equity Summary Score to adjust Medicare Advantage  plans’ CAHPS and HEDIS measures, which—instead of using the Area Deprivation Index—would stratify a subset of measures by race, ethnicity, and disability status to create a composite score affecting payment.

HCP-LAN Category 3

Moving further along the spectrum toward approaches more strongly tied to financial performance customized to an equity lens, the Hospital Readmission Reduction Program stratified financial benchmarks beginning in 2019. Instead of comparing all hospitals to one another, hospitals with higher proportions of dually eligible patients received their own benchmarks. The Hospital-Acquired Condition Reduction Program took a similar approach, with evidence that this decreased penalties for safety-net hospitals. Payers could consider other ways to apply this approach in the future, such as stratifying benchmarks by sociodemographic variables so that value assessment is no longer just about the average patient but about improving value within subpopulations.

HCP-LAN Category 4

The OHA’s CCO model has a decade of experience using the health-related services budget approach, which is farthest from a fee-for-service model. And most recently, as of 2021, the OHA’s CCO “2.0” contract requires, through the SHARE Initiative, that CCOs meeting certain financial standards spend a portion of budget surplus on equity activities, either to reduce health inequities or to invest within the local community on upstream “social determinants of equity,” flexibly defined. The latter concept can apply to both shared savings and global budget models—requiring portions of savings bonuses or budget surpluses to be spent on equity activities.  

One consideration from interviews and evidence is that shared losses may be inappropriate for organizations with larger safety-net and marginalized populations. These organizations traditionally have less resources, and the concern is that imposing shared losses could push them to leave VBP models.


The REACH ACO model is a major step forward for directly incorporating multiple VBP health equity design elements into a population-based advanced alternative payment model. We categorize equity-focused VBP design elements from early stages to more advanced approaches and compare how ACO REACH and other public and private payers have approached those elements (exhibits 1 and 2 in part 1 of this article).

Although ACO REACH’s equity-specific VBP design elements are not tied to financial or quality performance, they are contained within the model’s overall payment method of PBPM payments for either primary care services or for all covered services—a LAN Category 4 advanced alternative payment model. This combination of overall population-based accountability with steps toward equity accountability is a notable advancement for the field in sum, and the other non-REACH real-world examples we highlight show where there is opportunity to enhance each design element to even more advanced operationalizations.

We hope this synthesis will assist the Innovation Center, state policy makers, and commercial payers to further their efforts to embed equity in VBP model design. However, these approaches are generally new, so more evidence is needed to understand what works best and should be replicated or adapted in future VBP models—including the experiences of ACO REACH.

Authors’ Note

We would like to thank the following individuals for completing interviews with us for this article and helping to review content. They provided crucial insight and answered key questions we had, and we greatly appreciate their time and contributions to this work. The viewpoints expressed in this article do not necessarily reflect the viewpoints of the individuals below nor their organizations. Chris DeMars, MPH, interim director, delivery systems innovation office and director, Transformation Center, Oregon Health Authority; Mark Friedberg, MD, MPP, senior vice president, performance measurement and improvement, Blue Cross Blue Shield of Massachusetts; Christian Lassonde, senior director of negotiation financial management, Blue Cross Blue Shield of Massachusetts; Valerie Lewis, PhD, MA, associate professor, Department of Health Policy and Management, UNC Gillings School of Global Public Health, and Alissa Robbins, MPA, deputy director, Transformation Center, Oregon Health Authority. Dr. Bleser has previously received consulting fees from Merck for research for vaccine litigation unrelated to this work, from BioMedicalInsights, Inc., for subject matter expertise on value-based cardiovascular research unrelated to this work, from Gerson Lehrman Group, Inc., on health policy subject matter expertise unrelated to this work, and from StollenWerks, LLC, on health policy delivery system change unrelated to this work. He also serves as Board Vice President (uncompensated) for Shepherd’s Clinic, a clinic providing free healthcare to the uninsured in Baltimore, Maryland. Dr. Saunders has a consulting agreement with Yale-New Haven Health System for development of measures and development of quality measurement strategies for the Innovation Center alternative payment models under CMS contract No. 75FCMC18D0042/Task Order No. 75FCMC19F0003, “Quality Measure Development and Analytic Support,” Option Year 2. Dr. McClellan is an independent director on the boards of Johnson & Johnson, Cigna, Alignment Healthcare, and PrognomIQ; co-chairs the Guiding Committee for the Health Care Payment Learning and Action Network; and receives fees for serving as an advisor for Arsenal Capital Partners, Blackstone Life Sciences, and MITRE. The Duke-Margolis Center for Health Policy values academic freedom and research independence, and its policies on research independence and conflict of interest are available here.

Leave a Reply

Your email address will not be published. Required fields are marked *