LEAD Model: The ACO Test Most Organizations Will Fail - Before They Apply

Hey everyone. Welcome to the VBCA podcast. I'm your host Alex Yarijanian. CMS has posted the LEAD or long term Enhanced ACO Design Model, application materials and timelines for interested ACOs.

The new intern tool for preliminary scoring is due April 27th of 2026 and full applications are due by May 17th, 2026. It's important that you remember that the lead model will replace ACO Region 2027 with a 10 year demonstration supporting enhanced payments and care coordination flexibility. So for this episode I'm speaking from a provider payer operations perspective. If you're targeting lead participation, lock in financial guarantees, outcomes based contract templates and data narratives.

Now scoring domains cover organizational readiness and data integration. So what I'm going to do is help you very quickly structurally digest the key points of the application. I'm not going to go over applications, but what I'm going to do is give you what I'm hearing in terms of what CMS is considering important as well as the material itself. Based on how CMS will be scoring your application, I could tell you that most ACO applications fail before they're even submitted.

So if you don't want to be one of those applicants then, then listen up. I'm going to go into order of importance in terms of what you should have ready for a robust application, submittal and more importantly for success. Right? Because application is only one part of it.

So first I want to start with financial risk readiness, which is non negotiable. So if you're having a CFO conversation, you need to make sure, or as a CFO you need to make sure that you have defined risk corridor tolerance. Okay, we're starting to speak health insurance verbiage here. Simply because by definition in a value based program you're taking risk, financial risk, right?

That means that you can of course potentially lose money. So we don't want to do that. So we want to understand what is our downside, exposure thresholds, what could we tolerate? And then I want you to look at that and secure financial guarantees and have a reinsurance strategy.

And that could really start with doing a three year simple pro forma with utilization and trend assumptions. The point you're looking for there is if the trend runs 2% worse than you expected it would you still survive? That's the CFO gut check, right? If trend runs over 2% worse than expected, do we still survive?

So that's the CFO gut check for the financial readiness assessment. Second area of great import is the data and Interoperability story. So it's not enough that you can just collect data. What's important is that you can demonstrate integrated clinical claims and sdoh social determinants of health data feeds and demonstrate that you have real time or near real time performance tracking capability.

You need to demonstrate evidence of data driven interventions and not just reporting. Okay, CMS is done with dashboards. They want to see actionability from the data. And so the question that CMS is really asking is can you act on data and not just collect it?

The third area of import is care model differentiation. So this is an area that folks might underappreciate where you need to define your care coordination infrastructure. Are you using registered nurses, community health workers, aka CHWs? Do you have behavioral health components, et cetera?

What makes your care coordination infrastructure ready to handle financial risk? Do you have programs targeting high cost, high need populations? Hchn, it's a specific designation of a population. You can search it and these are essentially the folks you'd be targeting in your ACO program.

Right? Because a little change in the utilization of these types of populations create a huge change in the financial outcomes. And the third point under care model differentiation is whether you're having any type of integration of non traditional services, for example, doula care, for example, like I said, community health workers and so forth. These are the three areas you should focus on to make sure your care model is differentiated.

And this will help you get a scoring edge on that application because you'd be able to demonstrate biopsychosocial care, not just medical management. CMS and application reviewers do not want to see just medical management. That's actually a red flag for them. Next area of great import, again in order of what's important on the scoring sheet is a network and contracting strategy.

So have you identified a core provider network that has aligned incentives? If not, how will you build that kind of a network? It reminds me of my days at Humana where I was responsible for the healthcare partners relationship in Nevada before it was bought out by Optum. And essentially they had a very interesting model.

So Healthcare Partners at its core had an employed group of clinicians and coordinators and so forth that were dedicated to their fully at risk HMO populations. And then Healthcare partners had like if you visualize concentric circles, so if the core team is at the center, they're employed, they're assigned to deal solely with HMO patients. Then there's an outer circle, outer layer that is contracted healthcare partners network providers. And these are basically fee for service providers and they get the PPO members and you know, if these folks come in, great, there's some billing to be done.

If not, then there is no downside risk to be had. Right? So I thought that was a very interesting way of looking at it because healthcare partners align their contracts and their financial incentives with their structural setup internally. And it was done very well.

So that is important. Now again, under the network and contracting strategy, CMS wants to see documented value based contracts downstream. Not just with cms, they want to see that you're able to act like a risk manager and do you have risk management, the ability to push risk down another step. So that's going to be key to outline in your application.

And third area is under network and contracting strategy is do you have a strategy for specialist and post acute alignment? You know about 80% of costs in the healthcare system happen between the time where the patients are discharged from a hospital 90 days post acute. So you have to look at a post acute alignment strategy. That's where you're going to get a lot of bang for your buck.

So the reality check is this. Weak alignment equals leakage, equals missed savings, equals bad financial performance. Alignment is going to be key. And a fifth area is operational execution plan.

This is where you have to submit named executives and clinical leadership structure. You have to submit your defined care workflows and escalation pathways and have a clear timeline for go live and scale. From what I hear, CMS is looking for the following red flag where you know, they get the vibe of hey, nice idea but no operator. They're specifically looking for robust operators behind these submittals.

The sixth area is equity and access strategy. So explicit plan to address health disparities are important. However, this is no longer, you know, nice to have. It is a must have even if you're not naming it equity.

What they're calling it is health disparities. And you can signal it by saying we have integration with community based organizations and this is an area that anyway will be impacting your financial outcomes whether or not you, you call it out, right? So equity is no longer a narrative, it's a scoring mechanism. And if you cannot operationalize access, you cannot succeed in this elite program.

The brutal truth, you guys, is that most organizations won't fail lead because they're ineligible. They'll fail because they realize too late that they were never really built for risk. So the real question isn't should we apply? It's are we already operating like the organization CMS is looking for?

Because lead isn't a program it's a mirror. And not everyone's going to like what they see. I could tell you that much. So if you're thinking about lead right now, don't start with an application.

Start with your assumptions. This is Alex Yarijanian. I'm your host at the VBCA podcast. I hope this 10 minute segment gave you the insights you need to make the best decisions.