Primary Care Capitation (PCC) — Preparing for ACO REACH 2023

ACO REACH 2023: Primary Care Capitation (PCC) - Preparing for 2023

As we approach another Medicare ACO performance year (now in the ACO REACH model, following the sunset of Direct Contracting), we are providing a revised overview of Primary Care Capitation (PCC) in an easy-to-understand format. We encourage all new and returning Participant Providers to read this blog post to ensure they’re ready to hit the ground running in 2023.

For many primary care providers (PCPs), managing traditional Medicare fee-for-service (FFS) patients under a CMS-calculated budget is value-based care in its simplest form. The ACO REACH (ACO) Model builds upon this basic structure and introduces a mechanism to provide PCPs with increased revenue stability and more predictable cash flow for their aligned Medicare patients: Base Primary Care Capitation (BPCC).

If you’re a PCP joining a REACH ACO in 2023, there is a lot to learn about how capitation will impact your monthly revenue in advance of the January 1st start date. In this post, we will address providers’ most Frequently Asked Questions regarding BPCC.

Note: Capitation is the remittance to providers of a stable reimbursement that is not directly tied to the volume of healthcare services provided. In other words, rather than receiving compensation for each patient visit or procedure (fee for service), providers get a set reimbursement based on their assigned population. For a quick refresher on the various forms of capitation in ACO REACH (previously Direct Contracting), read this overview.

BPCC is a monthly payment from CMS to the REACH ACO meant to represent the cost of providing primary care services to its aligned ACO beneficiaries. The ACO then determines how much BPCC is allotted to each Participant Provider, based on the number of beneficiaries aligned to that provider, and distributes monthly payments accordingly. This capitated amount replaces providers’ fee-for-service primary care revenue (for aligned ACO beneficiaries only).
Note: Participant Providers do not need to convert 100% of their revenue from FFS to capitation (10% is the minimum for PY 2023, as required by CMS). Should a provider participate in an ACO and choose to take only a 10% FFS reduction (as an example), they would get 10% of the calculated BPCC and receive 90% of Medicare’s listed rates for any FFS claims they submit to CMS.

BPCC is calculated by looking at the proportion of the Total Medical Expenditures (TME) that is attributed to the primary care services that a PCP provided to their Medicare FFS patients over a specific period of time (e.g. for performance year 2023, it is based on the first three quarters of 2022). This proportion is then applied to the anticipated TME for the provider’s beneficiaries (i.e. the benchmark) for the upcoming performance year to create a nominal dollar capitation rate. The result is a per-beneficiary-per-month (PBPM) amount for each beneficiary aligned to the ACO’s participating PCPs.

Illustrative BPCC ExampleAmountsComments
2022 Historical Primary Care Costs$21,000,000For primary care codes (PCC) only
2022 Historical Total Medical Expenditures (TME)$600,000,000For all at-risk Part A and Part B claims
PY 2023 BPCC Rate3.5%Divides the PCC costs by the Historical TME
PY 2023 Benchmark (PBPM)$1,500The amount each beneficiary is expected to cost each month in 2023
PY 2023 BPCC Amount$52.50The BPCC rate multiplied by the benchmark = 3.5% x $1,500
2023 Aligned ACO Beneficiaries35,000Number of benes aligned to the ACO for 2023
2023 Total Monthly BPCC Amount$1,837,500Monthly amount paid by CMS to the ACO for PCC for all aligned patients
2023 Total Annual BPCC Amount$22,050,000Annual amount paid by the CMS to the ACO for PCC for all patients


Short answer: Yes, because the monthly BPCC amount is based on historical spend. In other words, it’s based on how PCPs billed in the year prior.

Long Answer: It is intended to sufficiently fund each PCP’s aligned panel of ACO beneficiaries based on the 2022 performance year medical expenditures. Remember, the BPCC is paid on a PBPM basis, (e.g. $52.50 PBPM), so if a PCP has more patients attributed to them in 2023 (e.g. 100 patients) compared to 2022 (e.g. 80 patients), their capitated payments will reflect the increase in patients (e.g. $52.50 BPCC amount * 100 patients * 12 months).

Short answer:  It may, but in a way that ties out financially and logically. Long answer:  CMS will modify the 2023 BPCC amounts on a monthly basis. Some notable drivers of these adjustments include changes to:
  • The count of currently aligned beneficiaries (e.g. the number of currently aligned 2023 patients will change over time with the addition of voluntarily aligned patients or monthly patient exclusions);
  • The regional rate based on movement of beneficiaries during PY2023 (e.g. a patient move from County A to County B, since benchmark rates vary by county);
  • The risk score of beneficiaries during PY2023 based on updated diagnostic codes (e.g. a patient acquires or resolves a new condition, which increases or decreases the benchmark);
  • CMS' estimate of the rate of inflation of healthcare expenditure and utilization of healthcare services (the "USPCC trend").
There will be a significant impact to PCPs’ reimbursement for Primary and Qualified Evaluation and Management (PQEM) codes (i.e. primary care codes) beginning in January of 2023. For all PCPs participating in a fully-capitated BPCC REACH ACO:
  1. Billing: PCPs should continue billing CMS as they normally would for all claims for all ACO patients. No changes here. It is critical to continue submitting FFS claims to maintain the capitation rates in future performance years.
  2. Reimbursement: Instead of being reimbursed by CMS for primary care claims, CMS will “zero out” their claims, meaning PCPs will receive $0 from CMS for their primary care services provided to ACO aligned beneficiaries, if the PCP selected 100% BPCC. If a PCP selected 10% BPCC, for example, CMS will reduce their claims by that amount.
  3. Capitation: On a monthly basis, the ACO will pay each PCP a capitated payment for aligned beneficiaries, whether or not a PCP sees some, all, or none of their aligned beneficiaries. For example, if an ACO patient does not see her PCP during a given month, the ACO will still reimburse the PCP the capitated amount for that patient.
  4. Shared Savings Revenue: PCPs have the opportunity to bear and capture value from the REACH ACO risk model by sharing in the cost savings that they generate from high-quality, cost-effective care. While shared savings are not paid out monthly like BPCC, PCPs will be rewarded about six to nine months after the performance year ends (e.g. Q3 2024).
(For Participant Providers who elected a FFS reduction <100%, the above guidance will hold true, except they will still receive a portion of the Medicare FFS when submitting claims.)

The value of capitation is to provide PCPs with more consistent, predictable monthly revenue so they can dedicate more of their time to managing the patients who need them most. Paying PCPs a stable capitated payment each month will reduce unnecessary utilization, increase quality of care, and lower the overall cost of healthcare. Dedicating more time to the highest-risk patients will lead to better patient outcomes, especially in the costly post-acute care setting (e.g. reduced skilled nursing facility utilization).

ACO REACH is the most innovative Medicare model ever launched by CMS. Requiring capitation is necessary to encourage PCPs to shift away from traditional FFS compensation to value-based payment arrangements and will benefit patients tremendously.

At Pearl, we believe that capitation is not only the future of reimbursement, but also the best, most tangible approach to fixing our broken and expensive healthcare system. We advise all of our PCPs to follow these simple tactics to excel in the REACH ACO model:
  1. Provide Annual Wellness Visits as early in the year as possible.
  2. This will enable PCPs to identify new chronic conditions, help ensure that patients have appropriate documentation for current health issues, and provide the opportunity to capture appropriate risk adjustment to properly fund the patient panel.
  3. Provide preventative primary care services for high-risk patients with multiple chronic conditions.
  4. Proactive management of high-risk patients will allow PCPs to identify issues sooner, thus lowering the likelihood of hospitalization, reducing cost of care, and untapping shared savings for providers. If PCPs lower the TME for their patients, they will share in the savings they generate.
    Additionally, increased primary care services in the current year (2023) will lead to increased BPCC amounts for ACO providers in the following year (2024).
  5. Voluntarily align Medicare FFS patients.
  6. Educate patients on the benefits of Voluntary Alignment to enhance care coordination and to retain (or grow) a provider’s panel to ensure a more stable monthly capitated amount.

For more help unpacking how Medicare’s ACO REACH model works, check out these resources Follow Pearl Health on LinkedIn or Twitter for regular insights in your newsfeed. 

Michael Monsegur

Michael Monsegur

Head of ACO Operations, Pearl Health