Key Takeaways
- CMS’ updates to ACO REACH for Performance Year 2026 reinforce a shift toward tighter financial controls and more stable, risk-bearing frameworks in Traditional Medicare.
- Changes to benchmarking, risk adjustment, and quality incentives may increase pressure and lower barriers for health systems & physician groups previously hesitant to engage.
- For primary care organizations evaluating value-based care strategy, REACH may now represent a viable, complementary pathway for select providers and populations — particularly with the right enablement partner.
Access the Full REACH 2026 FAQ
A Model Quietly Evolving in a Shifting Policy Landscape
Hospitals and health systems have long recognized the promise — and the complexity — of accountable care and advanced payment models. For many organizations, especially those managing high-need or underserved populations, fee-for-service economics continue to pose a fundamental misalignment — emphasizing volume rather than value and making it harder to operationalize population health strategies over time. These dynamics are intensifying as demographic shifts drive a larger, older Medicare population — reshaping payer mix, straining delivery capacity, and compressing margins.
In 2023, CMS launched the ACO Realizing Equity, Access, and Community Health (REACH) Model to advance the next generation of risk-bearing payment models in Traditional Medicare. Designed to promote greater accountability for total cost of care, REACH pairs prospective, population-based payments with two-sided financial risk — while also embedding requirements around care coordination and provider-led governance. The model reflects CMS’s broader goal of creating scalable, sustainable frameworks that reward proactive, outcomes-driven care.
In an announcement this week, CMS released a new set of policy updates slated to take effect in Performance Year 2026 — reinforcing its commitment to advanced, risk-bearing payment models like ACO REACH by sharpening its design. The latest refinements introduce tighter financial guardrails, updated benchmarking methodologies, and a greater emphasis on quality — reflecting a broader emphasis on sustainability, accountability, and long-term viability.
While CMS has not yet announced whether REACH will continue beyond 2026, the recent updates suggest a commitment to improving — not walking away from — the model. For health systems navigating Medicare margin pressure, rising utilization, and increasing expectations across ACO, MA, and FFS contracts, this may be a timely opportunity to revisit whether strategic participation in ACO REACH could complement existing value-based care and population health efforts.
What the 2026 Updates Signal
The ACO REACH updates announced this week are not sweeping reforms — but they mark a meaningful step in the model’s evolution. While the mechanics may appear technical, we believe these changes reinforce CMS’s intent to mature REACH into a more predictable and sustainable pathway for accountable care in Traditional Medicare. For health system leaders, they offer timely insights into how the agency is prioritizing model integrity, performance, and fiscal discipline.
Individually, these changes may appear limited. But taken together, they point to a model that is becoming more stable, transparent, and actuarially grounded — without losing the flexibility that made REACH attractive to early adopters. For health systems and physician groups watching from the sidelines, these shifts may help reduce perceived risk and offer clearer signals about how the model is evolving.
Below, we summarize the most consequential changes and their implications:
1. Benchmarks More Tied to Historical Performance
CMS will reduce the weight of regional spending in benchmark calculations — moving to a 60/40 historical-to-regional blend for Standard ACOs, and 55/45 for New Entrant and High Needs ACOs.1
Implication for health systems: This change may improve performance predictability by anchoring benchmarks more closely to your own historical costs. For organizations with historically high spend that have recently adopted more disciplined utilization management, it could offer an advantage. For others, it heightens the importance of monitoring internal cost trends — especially if regional variation has previously worked in your favor. In both cases, having a partner who can model these changes, forecast potential impact, and identify opportunities for performance improvement can be critical to making informed participation decisions.
2. Full Transition to the V28 Risk Adjustment Model
In 2026, CMS will fully adopt the V28 prospective HCC model for Standard and New Entrant ACOs, phasing out the prior blend with V24. The concurrent model for High Needs ACOs remains unchanged.2
Implications: This change aligns REACH more closely with risk adjustment practices in Medicare Advantage—raising the bar for documentation accuracy and prospective coding. For systems managing both MA and Traditional Medicare populations, V28 alignment may create workflow efficiencies—but also increases the need for consistent, clinically grounded coding practices.
3. Quality Withhold Increased from 2% to 5%
Beginning in PY2026, CMS will increase the quality withhold from 2% to 5% of an ACO’s benchmark. The same four quality measures will continue to apply:
- Unplanned admissions
- Follow-up after exacerbation
- All-condition readmissions
- CAHPS
Learn more about Quality Measures in ACO REACH
4. Narrower Risk Corridors in the Global Track
For ACOs in the Global track, CMS will lower the threshold at which shared savings or losses begin — from 25% to 10% of the benchmark in PY2026.3
Implication: The new threshold brings REACH closer to MSSP’s structure, where shared risk begins earlier. For organizations that are likely to perform well in ACO REACH, the Global risk track remains the most attractive path. as it is the only payment model that provides first dollar savings for such a wide margin; in contrast, the Professional track shares savings with the CMS immediately, as does MSSP.
While most health systems and physician groups are unlikely to exceed 10% in either direction, the narrowed corridor both raises the stakes for high-performing ACOs and offers protection for those that perform very poorly.
In this environment, having a partner with the actuarial expertise to model risk exposure — and the operational tools to manage it — can be the difference between upside opportunity and unintended loss.
5. New Constraints on Risk Score Growth
CMS will implement a cumulative 3% cap on risk score growth from 2019 to 2026 for Standard ACOs.4
Implication: These guardrails reflect a broader CMS effort to reduce variability and reinforce the actuarial integrity of value-based payment models. While typical coding patterns may not trigger caps, systems that have experienced steady risk score growth will need to recalibrate financial expectations.
These changes raise the bar for coding accuracy — not by increasing the upside, but by tightening the margin for error. As CMS limits risk score growth, it becomes even more important to document conditions accurately and consistently, ensuring compliance and minimizing variance. Health systems may benefit from strengthening internal workflows — or working with partners who can support documentation strategy under the evolving rules.
6. Retrospective Removal of SAHS Billing for 2 Codes
CMS will exclude two HCPCS codes — A4353 and A5057, related to urinary catheter supplies and ostomy bags — from 2024 expenditures and retrospective trend adjustments due to their classification as Significant, Anomalous, and Highly Suspect (SAHS) billing.
Implication: While limited in scope, this adjustment reflects CMS’s increasing focus on claims outliers that could distort benchmarks or savings calculations. It also marks a departure from prior SAHS policy by applying exclusions retroactively to benchmark years. Health systems and physician groups participating in REACH — or considering entry — should be prepared for more active oversight of utilization anomalies in both historical and prospective performance years, which is a much needed boon to an industry that has been plagued by fraudulent and wasteful billings over the past few years.
Taken together, these changes point to a model that is becoming more stable, transparent, and actuarially grounded — without losing the flexibility that made REACH attractive to early adopters. For health systems watching from the sidelines, these shifts may help reduce perceived risk and offer clearer signals about how the model is evolving.
Reading Between the Lines: ACO REACH Updates in Context
While the latest updates to ACO REACH are technical in nature, they come amid a broader recalibration of CMS’s value-based care and cost-saving strategy. Over the past year, the agency has ended several models — including Primary Care First and Making Care Primary — that failed to demonstrate meaningful savings or scalable infrastructure. By contrast, REACH has not only remained in place, but received targeted refinements aimed at tightening benchmarks, constraining variability, and reinforcing core financial mechanics. For health systems evaluating where to place long-term strategic bets, this contrast is instructive. Rather than launching new experiments, CMS appears focused on maturing a smaller set of risk-bearing models that reflect its evolving priorities in Traditional Medicare.
At the same time, the changes to benchmarking, risk score constraints, and quality withholds point to an increasingly deliberate posture around fiscal sustainability and actuarial integrity. These are not one-off tweaks—we believe they are signals of how CMS intends to manage risk, align incentives, and stabilize performance expectations across its portfolio. For health systems and physician groups that have historically opted out of REACH due to perceived volatility, these adjustments may reduce the friction associated with evaluating participation, particularly when paired with the right analytics and infrastructure. In an environment where accurate forecasting and disciplined performance management are becoming prerequisites for success, REACH is beginning to look less like an experiment — and more like the future.
Despite that hypothesis, the model’s future is not guaranteed. REACH is currently slated to sunset at the end of 2026, and CMS has yet to confirm what will follow. Still, the agency’s decision to invest in its improvement — rather than accelerate its closure — suggests a continued appetite for provider-led risk structures within Traditional Medicare. For health systems and providers managing a complex payer mix across ACO, MA, and FFS contracts, this may be the right time to revisit REACH — not as a wholesale shift, but as a complementary effort for select physician cohorts, geographic markets, or populations positioned for success in risk-bearing models, within a broader portfolio of value-based care investments.
What This Could Mean for Health Systems & Providers
For health systems and providers, the 2026 changes to ACO REACH offer more than just policy fine-tuning — they offer an opening to reconsider the model’s strategic fit within an evolving Medicare landscape.
- First, REACH may now serve as a more predictable on-ramp to risk. With benchmarks more closely tied to historical spending and clearer parameters around risk adjustment, the model offers a framework that rewards disciplined utilization and reduces reliance on regional benchmarking dynamics. For organizations with mature primary care networks or prior MSSP experience, this opens the door to exploring participation in a measured, scalable way — without needing to shift the entire organization overnight.
- Second, REACH enables capitated payment models without requiring wholesale infrastructure transformation. Through Primary Care Capitation, participating providers can receive stable monthly payments without upending EMR systems or building population health tooling from scratch. Paired with the right enablement partner, this allows health systems and physician groups to deploy targeted, risk-based programs without overcommitting capital or operational bandwidth.
- Third, the model may offer a strategic hedge against narrowing Traditional Medicare FFS margins and volatility in Medicare Advantage. With MA under increasing regulatory scrutiny and fee-for-service margins continuing to compress, REACH provides another lever to manage performance across Medicare contracts — especially for select markets or provider cohorts already focused on longitudinal care and cost management.
How Pearl Can Help
While ACO REACH may offer new strategic potential, realizing that potential requires more than policy awareness — it requires the infrastructure, insights, and clinical alignment to operationalize performance under evolving rules.
At Pearl, we work with health systems, physician groups, and primary care providers to optimize performance in risk-bearing models like ACO REACH and make it easier to succeed.
Contact us
- Centers for Medicare & Medicaid Services. “ACO REACH Model Performance Year 2026 Model Update – Quick Reference.” Last modified May 21, 2025.
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