The Service Line

CMS’s two most recent report cards on its own ACO REACH model, published days apart in July, tell operators two different stories about the model roughly 115 accountable care organizations (ACOs) are being asked to decide whether to extend into a ten-year commitment. The agency’s settlement results for performance year 2024, released July 9, credit ACO REACH’s participants with $2.5 billion in gross savings and $988.3 million in net savings returned to CMS, with 96 of 115 ACOs (83 percent) earning shared savings and only 19 (17 percent) posting a net loss, the best year on record for the model. CMS’s own third independent evaluation of the model, also published in July, uses a different yardstick, a comparison group of similar beneficiaries outside the model, and finds net Medicare spending under REACH rose 0.8 percent in performance year 2023 before narrowing to a 0.2 percent increase in performance year 2024, an improving trend but still the opposite direction from the settlement math’s “net savings” framing. The discrepancy lands as ACOs that applied to the Long-Term Enhanced ACO Design (LEAD) Model, REACH’s successor, by the May 17 deadline wait to hear whether they are accepted for the January 2027 start; CMS has not, in documents reviewed this run, published a list of accepted LEAD participants. Confidence: High on both sets of figures, each from a CMS-published document; Medium on how or whether CMS plans to publicly reconcile the two methodologies. Sources: ACO REACH participants generated nearly $1B in 2024 savings: CMS, Fierce Healthcare, Evaluation of the ACO REACH Model, Report 3, CMS Innovation Center, LEAD (Long-Term Enhanced ACO Design) Model, CMS.

Reimbursement: LEAD’s payment menu asks ACOs to pick a capitation model and a ten-year lock-in

The LEAD Model replaces ACO REACH’s benchmark-and-shared-savings structure with a menu of capitated payment options CMS has detailed since the Request for Applications closed May 17. ACOs choosing the Professional Risk Option, sharing 50 percent of savings or losses, must take Primary Care Capitation, a monthly per-beneficiary payment for primary care services; ACOs in the Global Risk Option, sharing 100 percent of savings or losses and accepting a benchmark discount of roughly 1.75 to 3 percent, can choose Primary Care Capitation or Total Care Capitation, which converts all attributed beneficiaries’ Medicare Parts A and B spending into a monthly capitated payment. An Enhanced Primary Care Capitation option front-loads cash for staffing and infrastructure but must be repaid to CMS in full at the end of the performance year, and a Non-Primary Care Capitation option lets ACOs sub-capitate specialists on fixed monthly payments; a 1.5 percent administrative add-on for ACOs with higher baseline spending does not have to be repaid. Every option locks in for ten years, twice MSSP’s five-year agreement periods. Confidence: High, terms are published in CMS’s own payment fact sheet and FAQ. Sources: LEAD Model Payment Fact Sheet, CMS Innovation Center, LEAD Model Frequently Asked Questions, CMS.

Enforcement: California makes an example of a “friendly PC” structure with a $4.5 million bill and a forced restructuring

California Attorney General Rob Bonta announced a $4.5 million settlement on June 26 with Carbon Health Technologies, its affiliated medical groups, and co-founder Eren Bali, resolving allegations that the primary and urgent care operator’s management services organization (MSO) violated the state’s ban on the corporate practice of medicine by controlling clinical decisions, hiring, and pricing at its more than 80 clinics, 54 of them in California, through a “friendly PC” structure of assignable option agreements and above-market financing. The settlement requires Carbon Health to restructure the arrangement so licensed physicians, not the MSO, control the medical group, and attributes personal liability to Bali, an unusual individual-accountability term in a corporate-practice-of-medicine case. It is the state’s largest such settlement against a primary/urgent care platform to date, and any MSO-financed primary care roll-up, inside or outside an ACO, is the direct read-across. Confidence: High, primary source is the Attorney General’s own release. Source: Attorney General Bonta Announces First-of-Its-Kind Settlement with Carbon Health, California Department of Justice.

Who’s Buying: Pearl Health banks $110 million to bet AI, not benchmarks, is the next edge in value-based primary care

Pearl Health, a technology platform supporting more than 10,000 primary care providers managing an estimated $3.6 billion in annualized Medicare medical spending across more than 40 states, raised $110 million on July 8, a $50 million equity round led by Andreessen Horowitz with Viking Global Investors, AlleyCorp, and Ulysses Capital participating, plus a $60 million debt facility led by Trinity Capital. The company says it reached profitability in 2025 and is projecting $500 million in gross healthcare savings while tripling its patient base from 2024 through the end of 2026, and plans to use the capital to expand its artificial intelligence risk-modeling platform into Medicare Advantage and new risk-bearing arrangements beyond ACO enablement. It is the largest disclosed venture round in the ACO-enablement software layer since Aledade’s $500 million credit facility in December, evidence investors still see room to fund the technology underneath value-based primary care even as the REACH-to-LEAD transition adds uncertainty to the payment model itself. Confidence: High, company-disclosed terms. Source: Pearl Health Raises $110 Million to Expand Its AI Platform, PR Newswire.

Clinical Policy: employers, not patients, now pay for most direct primary care memberships

For the first time, employers fund the majority, 60 percent, of active direct primary care (DPC) memberships, according to Hint Health’s 2026 Direct Primary Care Trends Report, as the model has grown from a niche cash-pay alternative into an option employers are buying at scale; the report puts DPC membership growth at 837 percent from 2017 to 2025 and projects the wider DPC market growing from $70.2 billion in 2025 to $75.1 billion in 2026. Separately, BestDPC’s July 2026 count found 1,497 geo-located DPC clinics across 43 states, with Texas (171) and Florida (167) leading and Minnesota and Colorado emerging as new high-concentration hubs. For MSSP and REACH ACOs watching physicians opt out of risk contracts and fee-for-service alike, DPC’s shift from individual cash-pay to employer procurement is a competing, not complementary, model for primary care capacity. Confidence: Medium, Hint Health is an industry vendor with a commercial interest in DPC’s growth narrative, and the underlying member and clinic counts are vendor-reported, not independently audited. Sources: 2026 Direct Primary Care Trends Report, Hint Health, State of Direct Primary Care 2026, BestDPC.

The Operator Metric: 17 percent of ACO REACH participants lost money on paper in the model’s best year

Of the 115 ACOs in ACO REACH’s performance year 2024, 19, or 17 percent, owed CMS money rather than earning shared savings, even in the year CMS calls the model’s strongest on record. That downside-risk rate, not the aggregate $988.3 million net savings figure CMS leads with, is the number an ACO weighing a ten-year LEAD Model commitment should be underwriting against, since LEAD’s Global Risk Option raises the stakes to 100 percent of savings or losses with no cap comparable to MSSP’s more forgiving BASIC track. Confidence: High, both figures are stated in CMS’s own performance year 2024 results. Source: ACO REACH participants generated nearly $1B in 2024 savings: CMS, Fierce Healthcare.