ACO REACH Saved $706M and Cut Nursing Home Hospitalizations. So Why Did Net Spending Climb?

The Accountable Care Organization Realizing Equity, Access and Community Health model — better known as ACO REACH — is winding down this year, and the final numbers are painting a complicated picture for nursing home operators.

Gross savings looked strong on paper. ACO REACH reduced overall Medicare spending by $706 million, according to a CMS report released in July. High-needs ACOs — the bracket that includes the most medically complex beneficiaries, many of whom reside in skilled nursing facilities — posted the steepest decline at 8.9%. Standard ACOs saw spending fall 2%, while new entrant ACOs dropped 6.2%.

But here is the catch. Shared savings and incentive payments paid back to participating providers more than wiped out those reductions. When the math settled, net Medicare spending for high-needs ACOs actually rose 11.4%. Standard and new entrant ACOs saw smaller net increases of 0.7% and 1.9%, respectively.

The data matters because ACO REACH served more than 2.5 million beneficiaries. High-needs patients averaged 12.2 chronic conditions — nearly double the burden seen in other cohorts. About 57% were dually eligible for Medicare and Medicaid, and 43% had long-term care utilization. Annual mortality in this group exceeded 20%.

Despite that level of complexity, the model delivered measurable clinical gains. Hospitalizations among high-needs beneficiaries fell 13.2%. Acute care days dropped 16.3%. Emergency department visits and observation stays declined 6.4%, and SNF days fell 13.6%.

CMS is pointing to these results as proof that proactive monitoring and care coordination across settings can bend the cost curve. The agency has already baked several of the model’s features into its successor program, the Long-Term Enhanced ACO Design, or LEAD.

What LEAD will look like

LEAD is scheduled to replace ACO REACH and includes revised benchmarking, concurrent risk adjustment for high-needs populations, and lower beneficiary minimums for qualifying high-needs ACOs. It also adds home-based voluntary alignment and more financial support for operators caring for medically complex patients.

Industry observers, including the American Health Care Association and National Center for Assisted Living, say it is not yet clear whether LEAD will fully address the core challenges that surfaced under ACO REACH. The trade group has flagged questions about whether the new model can sustain the clinical gains without the same cost inflation.

For nursing home operators, one detail stands out. The SNF 3-day stay rule and home health waivers were the most frequently used benefit enhancements within high-needs ACOs. That suggests the model leaned heavily on post-acute and facility-based care to keep patients out of hospitals — a pattern operators will want to watch as LEAD takes shape.

Nursing home operators are already navigating a wave of Medicare payment rule changes this summer, and the transition from ACO REACH to LEAD adds another layer of uncertainty. The question is not whether value-based care is coming — it is whether the next model can deliver savings that actually stick.